8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) January 19, 2007

VMS NATIONAL PROPERTIES JOINT VENTURE

(Exact name of Registrant as specified in its charter)

            Illinois

  0-14194

  36-3311347

 (State or other jurisdiction

(Commission

     (I.R.S. Employer

 of incorporation or

File Number)

  Identification Number)

           organization)

55 Beattie Place

Post Office Box 1089

Greenville, South Carolina 29602

(Address of principal executive offices)

(864) 239-1000

(Issuer's telephone number)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions:

[ ]

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ]

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ]

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ]

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01

Entry into a Material Definitive Agreement.

Please see the description under Item 2.03, below.

Item 2.03  Creation of a Direct Financial Obligation or an Obligation Under an Off-Balance Sheet Arrangement of a Registrant.

As previously reported, on January 19, 2007, VMS National Properties Joint Venture, an Illinois joint venture (the “Registrant”), obtained new mortgage debt on all fifteen of its investment properties.

The previously reported description of the new loan terms was qualified in its entirety by reference to the various individual loan and guarantee documents, copies of which are filed as exhibits 10.11 through 10.63 to this report.

Item 9.01

Financial Statements and Exhibits

(d)

Exhibits

10.11

Secured Promissory Note – Loan 755505 Mountain View Apartments between VMS National Properties Joint Venture, an Illinois joint venture, and Principal Life Insurance Company, an Iowa Corporation dated January 19, 2007.

10.12

Deed of Trust, Security Agreement, Assignment of Rents and Fixture Filing – Loan 755505 Mountain View Apartments between VMS National Properties Joint Venture, an Illinois joint venture, and Principal Life Insurance Company, an Iowa Corporation dated January 19, 2007.

10.13

Guaranty – Loan 755505 Mountain View Apartments between AIMCO Properties, L.P., a Delaware limited partnership, and Principal Life Insurance Company, an Iowa Corporation dated January 19, 2007.

10.14

Property Reserves Agreement – Loan 755505 Mountain View Apartments between VMS National Properties Joint Venture, an Illinois joint venture, and Principal Life Insurance Company, an Iowa Corporation dated January 19, 2007.

10.15

Secured Promissory Note – Loan 755504 Casa de Monterey between VMS National Properties Joint Venture, an Illinois joint venture, and Principal Life Insurance Company, an Iowa Corporation dated January 19, 2007.

10.16

Deed of Trust, Security Agreement, Assignment of Rents and Fixture Filing – Loan 755504 Casa de Monterey between VMS National Properties Joint Venture, an Illinois joint venture, and Principal Life Insurance Company, an Iowa Corporation dated January 19, 2007.

10.17

Guaranty – Loan 755504 Casa de Monterey between AIMCO Properties, L.P., a Delaware limited partnership, and Principal Life Insurance Company, an Iowa Corporation dated January 19, 2007.

10.18

Property Reserves Agreement – Loan 755504 Casa de Monterey between VMS National Properties Joint Venture, an Illinois joint venture, and Principal Life Insurance Company, an Iowa Corporation dated January 19, 2007.

10.19

Secured Promissory Note – Loan 755503 Pathfinder Village between VMS National Properties Joint Venture, an Illinois joint venture, and Principal Life Insurance Company, an Iowa Corporation dated January 19, 2007.

10.20

Deed of Trust, Security Agreement, Assignment of Rents and Fixture Filing – Loan 755503 Pathfinder Village between VMS National Properties Joint Venture, an Illinois joint venture, and Principal Life Insurance Company, an Iowa Corporation dated January 19, 2007.

10.21

Guaranty – Loan 755503 Pathfinder Village between AIMCO Properties, L.P., a Delaware limited partnership, and Principal Life Insurance Company, an Iowa Corporation dated January 19, 2007.

10.22

Property Reserves Agreement – Loan 755503 Pathfinder Village between VMS National Properties Joint Venture, an Illinois joint venture, and Principal Life Insurance Company, an Iowa Corporation dated January 19, 2007.

10.23

Secured Promissory Note – Loan 755502 Crosswood Park between VMS National Properties Joint Venture, an Illinois joint venture, and Principal Life Insurance Company, an Iowa Corporation dated January 19, 2007.

10.24

Deed of Trust, Security Agreement, Assignment of Rents and Fixture Filing – Loan 755502 Crosswood Park between VMS National Properties Joint Venture, an Illinois joint venture, and Principal Life Insurance Company, an Iowa Corporation dated January 19, 2007.

10.25

Guaranty – Loan 755502 Crosswood Park between AIMCO Properties, L.P., a Delaware limited partnership, and Principal Life Insurance Company, an Iowa Corporation dated January 19, 2007.

10.26

Property Reserves Agreement – Loan 755502 Crosswood Park between VMS National Properties Joint Venture, an Illinois joint venture, and Principal Life Insurance Company, an Iowa Corporation dated January 19, 2007.

10.27

Secured Promissory Note – Loan 755501 Buena Vista Apartments between VMS National Properties Joint Venture, an Illinois joint venture, and Principal Life Insurance Company, an Iowa Corporation dated January 19, 2007.

10.28

Deed of Trust, Security Agreement, Assignment of Rents and Fixture Filing – Loan 755501 Buena Vista Apartments between VMS National Properties Joint Venture, an Illinois joint venture, and Principal Life Insurance Company, an Iowa Corporation dated January 19, 2007.

10.29

Guaranty – Loan 755501 Buena Vista Apartments between AIMCO Properties, L.P., a Delaware limited partnership, and Principal Life Insurance Company, an Iowa Corporation dated January 19, 2007.

10.30

Property Reserves Agreement – Loan 755501 Buena Vista Apartments between VMS National Properties Joint Venture, an Illinois joint venture, and Principal Life Insurance Company, an Iowa Corporation dated January 19, 2007.

10.31

Secured Promissory Note – Loan 755500 Towers of Westchester Park between VMS National Properties Joint Venture, an Illinois joint venture, and Principal Life Insurance Company, an Iowa Corporation dated January 19, 2007.

10.32

Deed of Trust, Security Agreement, Assignment of Rents and Fixture Filing – Loan 755500 Towers of Westchester Park between VMS National Properties Joint Venture, an Illinois joint venture, and Principal Life Insurance Company, an Iowa Corporation dated January 19, 2007.

10.33

Guaranty – Loan 755500 Towers of Westchester Park between AIMCO Properties, L.P., a Delaware limited partnership, and Principal Life Insurance Company, an Iowa Corporation dated January 19, 2007.

10.34

Property Reserves Agreement – Loan 755500 Towers of Westchester Park between VMS National Properties Joint Venture, an Illinois joint venture, and Principal Life Insurance Company, an Iowa Corporation dated January 19, 2007.

10.35

Secured Promissory Note – Loan #1 755498 Scotchollow between VMS National Properties Joint Venture, an Illinois joint venture, and Principal Life Insurance Company, an Iowa Corporation dated January 19, 2007.

10.36

Secured Promissory Note – Loan #2 755498 Scotchollow between VMS National Properties Joint Venture, an Illinois joint venture, and Principal Life Insurance Company, an Iowa Corporation dated January 19, 2007.

10.37

Deed of Trust, Security Agreement, Assignment of Rents and Fixture Filing – Loan 755498 Scotchollow between VMS National Properties Joint Venture, an Illinois joint venture, and Principal Life Insurance Company, an Iowa Corporation dated January 19, 2007.

10.38

Guaranty – Loan 755498 Scotchollow between AIMCO Properties, L.P., a Delaware limited partnership, and Principal Life Insurance Company, an Iowa Corporation dated January 19, 2007.

10.39

Property Reserves Agreement – Loan 755498 Scotchollow between VMS National Properties Joint Venture, an Illinois joint venture, and Principal Life Insurance Company, an Iowa Corporation dated January 19, 2007.

10.40

MultiFamily Deed of Trust, Assignment of Rents and Security Agreement – The Bluffs between VMS National Properties Joint Venture, an Illinois joint venture, and CAPMARK Finance, Inc., a California Corporation dated January 18, 2007.

10.41

MultiFamily Note (Variable Loan)– The Bluffs between VMS National Properties Joint Venture, an Illinois joint venture, and CAPMARK Finance, Inc., a California Corporation dated January 18, 2007.

10.42

Guaranty – The Bluffs between AIMCO Properties, L.P., a Delaware limited partnership, and CAPMARK Finance, Inc., a California Corporation dated January 18, 2007.

10.43

MultiFamily Deed of Trust, Assignment of Rents and Security Agreement – Forest Ridge Apartments between VMS National Properties Joint Venture, an Illinois joint venture, and CAPMARK Finance, Inc., a California Corporation dated January 18, 2007.

10.44

MultiFamily Note (Variable Loan)– Forest Ridge Apartments between VMS National Properties Joint Venture, an Illinois joint venture, and CAPMARK Finance, Inc., a California Corporation dated January 18, 2007.

10.45

Guaranty – Forest Ridge Apartments between AIMCO Properties, L.P., a Delaware limited partnership, and CAPMARK Finance, Inc., a California Corporation dated January 18, 2007.

10.46

MultiFamily Deed of Trust, Assignment of Rents and Security Agreement – North Park Apartments between VMS National Properties Joint Venture, an Illinois joint venture, and CAPMARK Finance, Inc., a California Corporation dated January 18, 2007.

10.47

MultiFamily Note (Variable Loan)– North Park Apartments between VMS National Properties Joint Venture, an Illinois joint venture, and CAPMARK Finance, Inc., a California Corporation dated January 18, 2007.

10.48

Guaranty – North Park Apartments between AIMCO Properties, L.P., a Delaware limited partnership, and CAPMARK Finance, Inc., a California Corporation dated January 18, 2007.

10.49

MultiFamily Deed of Trust, Assignment of Rents and Security Agreement – Chapelle Le Grande between VMS National Properties Joint Venture, an Illinois joint venture, and CAPMARK Finance, Inc., a California Corporation dated January 18, 2007.

10.50

MultiFamily Note (Variable Loan)– Chapelle Le Grande between VMS National Properties Joint Venture, an Illinois joint venture, and CAPMARK Finance, Inc., a California Corporation dated January 18, 2007.

10.51

Guaranty – Chapelle Le Grande between AIMCO Properties, L.P., a Delaware limited partnership, and CAPMARK Finance, Inc., a California Corporation dated January 18, 2007.

10.52

MultiFamily Deed of Trust, Assignment of Rents and Security Agreement – Shadow Wood Apartments between VMS National Properties Joint Venture, an Illinois joint venture, and CAPMARK Finance, Inc., a California Corporation dated January 18, 2007.

10.53

MultiFamily Note (Variable Loan)– Shadow Wood Apartments between VMS National Properties Joint Venture, an Illinois joint venture, and CAPMARK Finance, Inc., a California Corporation dated January 18, 2007.

10.54

Guaranty – Shadow Wood Apartments between AIMCO Properties, L.P., a Delaware limited partnership, and CAPMARK Finance, Inc., a California Corporation dated January 18, 2007.

10.55

MultiFamily Deed of Trust, Assignment of Rents and Security Agreement – Vista Village Apartments between VMS National Properties Joint Venture, an Illinois joint venture, and CAPMARK Finance, Inc., a California Corporation dated January 18, 2007.

10.56

MultiFamily Note (Variable Loan)– Vista Village Apartments between VMS National Properties Joint Venture, an Illinois joint venture, and CAPMARK Finance, Inc., a California Corporation dated January 18, 2007.

10.57

Guaranty – Vista Village Apartments between AIMCO Properties, L.P., a Delaware limited partnership, and CAPMARK Finance, Inc., a California Corporation dated January 18, 2007.

10.58

MultiFamily Deed of Trust, Assignment of Rents and Security Agreement – Watergate Apartments between VMS National Properties Joint Venture, an Illinois joint venture, and CAPMARK Finance, Inc., a California Corporation dated January 18, 2007.

10.59

MultiFamily Note (Variable Loan)– Watergate Apartments between VMS National Properties Joint Venture, an Illinois joint venture, and CAPMARK Finance, Inc., a California Corporation dated January 18, 2007.

10.60

Guaranty – Watergate Apartments between AIMCO Properties, L.P., a Delaware limited partnership, and CAPMARK Finance, Inc., a California Corporation dated January 18, 2007.

10.61

MultiFamily Deed of Trust, Assignment of Rents and Security Agreement – Terrace Gardens Townhouses between VMS National Properties Joint Venture, an Illinois joint venture, and CAPMARK Finance, Inc., a California Corporation dated January 18, 2007.

10.62

MultiFamily Note (Variable Loan)– Terrace Gardens Townhouses between VMS National Properties Joint Venture, an Illinois joint venture, and CAPMARK Finance, Inc., a California Corporation dated January 18, 2007.

10.63

Guaranty – Terrace Gardens Townhouses between AIMCO Properties, L.P., a Delaware limited partnership, and CAPMARK Finance, Inc., a California Corporation dated January 18, 2007.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

VMS National Properties Joint Venture

(an Illinois joint venture)

VMS National Residential Portfolio I

By:

MAERIL, Inc.

Managing General Partner

By:

/s/Stephen B. Waters

Stephen B. Waters

Vice President

 Date:  January 30, 2007

VMS National Residential Portfolio II

By:

MAERIL, Inc.

Managing General Partner

By:

/s/Stephen B. Waters

Stephen B. Waters

Vice President

 Date:  January 30, 2007

EX-10

Exhibit 10.11

SECURED PROMISSORY NOTE

755505

$23,300,000.00

January 19, 2007

1.

FOR VALUE RECEIVED, VMS NATIONAL PROPERTIES, an Illinois general partnership, as "Borrower" ("Borrower"), hereby promises to pay to the order of PRINCIPAL LIFE INSURANCE COMPANY, an Iowa corporation (as "Lender"), the principal sum of Twenty-three Million Three Hundred Thousand and 00/100 Dollars ($23,300,000.00) or so much thereof as shall from time to time have been advanced, together with interest on the unpaid balance of said sum from January 19, 2007 (the "Closing Date"), at the rate of six and sixteen one-hundredths percent (6.16%) per annum.  

A payment of interest from the Closing Date to and including January 31, 2007 shall be paid on the Closing Date calculated by multiplying the actual number of days elapsed in the period for which interest is being calculated by a daily rate based on the foregoing annual interest rate and a 360-day year.  Thereafter, interest shall be computed on the unpaid balance on the basis of a 360-day year composed of twelve 30-day months.  Beginning on March 1, 2007, interest shall be due and payable in installments of One Hundred Nineteen Thousand Six Hundred Six and 67/100 Dollars ($119,606.67), with an installment in a like amount due and payable on the same day of each month thereafter, and except as otherwise provided in this Note, all remaining principal and interest to the date of payment and other indebtedness shall be due and payable on February 1, 2010 ("Call Date").  Lender shall have the right to declare this Note to be due and payable in full on the Call Date or to adjust the per annum interest rate on the Rate Adjustment Date to an interest rate established by Lender ("Adjusted Interest Rate") as herein provided (and apply an amortization schedule, if any, as herein provided).  In the event Lender elects to declare this Note to be due and payable, this Note shall become due and payable, in full, without a Make Whole Premium on the Call Date.  In the event Lender elects to adjust the interest rate, then on February 1, 2010 ("Rate Adjustment Date") the per annum interest rate shall be adjusted to the Adjusted Interest Rate and commencing on March 1, 2010, monthly installments of principal (if applicable) and interest shall be due and payable on the same day of each month thereafter, except that all remaining principal and interest to the date of payment shall be due and payable on February 1, 2012 or such earlier date resulting from acceleration of the Indebtedness by Lender ("Maturity Date").  Each installment shall be credited first upon interest then accrued and the remainder upon principal.  All principal and interest shall be paid in lawful money of the United States of America, by wire transfer of immediately available funds to Lender.  Any other monthly deposits or payments Borrower is required to make to Lender under the terms of the Loan Documents shall be made by the same payment method and on the same date as the installments of principal and interest due under this Note.

Lender shall notify Borrower in writing ("Lender's Election Notice") on or before November 1, 2009 of Lender's election to adjust the interest rate or of Lender's intention to declare this Note to be due and payable in full.  In the event Lender elects to adjust the interest

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rate, Lender's Election Notice will contain (i) the number of basis points ("Spread") and the United States Treasury Issue (which shall be the two (2) year United States Treasury Issue) that Lender anticipates it will use to establish the Adjusted Interest Rate and (ii) the amortization schedule Lender has elected to apply, if any.  The Spread shall be determined by Lender in its sole discretion based on Lender's evaluation of:  (i) the then current financial performance and projected risk of the Premises, which shall encompass various factors, including but not limited to contract debt service coverage, loan-to-value ratio, economic debt service coverage, occupancy, frequency of tenant rollover, financial strength and stability of tenants; (ii) the then current financial status of Borrower, which shall include but not be limited to creditworthiness, financial strength, percentage of liabilities to liquid assets, and annual ne t income; and (iii) the remaining term and current outstanding balance of the Note.  

At any time and from time to time before the Adjusted Interest Rate is established, provided at least seven (7) days have elapsed since the previous Lender's Election Notice, Lender may establish a new Spread which Lender anticipates it will use to establish the Adjusted Interest Rate and notify Borrower of the same.  The Adjusted Interest Rate and amortization schedule, if any, must be established by mutual written agreement of Lender and Borrower by December 1, 2009 (the "Rate Set Deadline").  The Adjusted Interest Rate may only be established by mutual written agreement of Lender and Borrower and simultaneous payment by Borrower of Twelve Thousand Three Hundred and 00/100 Dollars ($12,300.00) ("Rate Adjustment Fee"). Notwithstanding anything contained herein to the contrary in the event:  (i) Lender notifies Borrower of its intention to declare this Note to be due and payable in full, (ii) Lender and Borrower are unable for any reason to mutually agree in writing on the Adjusted Interest Rate by the Rate Set Deadline; or (iii) Borrower fails to pay the Rate Adjustment Fee to Lender when due, this Note shall become due and payable in full, on the Call Date, without a Make Whole Premium, and all principal, interest accrued or to accrue to the date of prepayment at the rate in effect at the time of the initial Lender's Election Notice, and all other Indebtedness shall become immediately due and payable in full.  Notwithstanding any other provision herein, Lender shall not be obligated to adjust the interest rate if any default exists under this Note or the Loan Documents.

In the event Borrower accepts the Adjusted Interest Rate, then notwithstanding anything herein or in any of the Loan Documents to the contrary, Borrower shall have no right to prepay the Loan at par during the Open Period and any prepayment will be subject to a Make Whole Premium for the period ending on the Maturity Date calculated at the Adjusted Interest Rate.

In the event Borrower accepts the Adjusted Interest Rate, Borrower is required to provide Lender the following:

(i)

a new ALTA standard loan title policy for the Loan or an endorsement updating said title policy in the full amount of the in form and by an issuer satisfactory to Lender at the time of the rate adjustment unless (x) the outstanding balance of the Loan at the time of the Call Date is equal to or less than $20,000,000.00, (y) no

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liens or encumbrances exist against the Premises except as previously approved by Lender in the Deed of Trust, and (z) no mortgages or deeds of trust exist against the Premises except for the Mortgage.  Borrower further agrees that the policy shall insure Lender's Deed of Trust, at the Adjusted Interest Rate to be a first and prior lien subject only to those exceptions which were previously approved by Lender and provide coverage against mechanic's liens;

(ii)

an amendment to the Note in form and substance satisfactory to Lender executed by Borrower evidencing the Adjusted Interest Rate and a representation that the Premises is free and clear of any liens, privileges, mortgages or encumbrances except as expressly permitted in the Deed of Trust;

(iii)

a usury opinion or endorsement to the title policy acceptable to Lender if Lender reasonably believes that the Adjusted Interest Rate is or may be usurious; and

(iv)

a title search acceptable to Lender and reimbursement for Lender's costs incurred in obtaining the same.

2.

No privilege is reserved by Borrower to prepay any principal of this Note prior to the Maturity Date, except on or after the date hereof, privilege is reserved, after giving thirty (30) days' prior written notice to Lender, to prepay in full, but not in part, all principal and interest to the date on which payment is made, along with all sums, amounts, advances, or charges due under any instrument or agreement by which this Note is secured, upon the payment of a "Make Whole Premium" if required by the schedule below, provided that Borrower simultaneously exercises its right to prepay the Other Note as provided for therein.  The Make Whole Premium shall be based on the following schedule:

(i)

if prepayment occurs prior to March 1, 2008 or after February 1, 2010 and prior to March 1, 2011, the Make Whole Premium shall be one-half percent (.50%) of the principal amount to be prepaid;

(ii)

provided no Event of Default exists, during the period beginning on or after March 1, 2008 to and including February 1, 2010 or on or after March 1, 2011 to and including February 1, 2012 (each collectively the "Open Period") no Make Whole Premium shall be payable.

3.

Borrower agrees that if Lender accelerates the whole or any part of the principal sum evidenced hereby after the occurrence of an Event of Default but prior to the Open Period, Borrower waives any right to prepay said principal sum in whole or in part without premium and agrees to pay, as yield maintenance protection and not as a penalty, the Make Whole Premium.  

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In the event any proceeds from a casualty or Taking of the Premises are applied to reduce the principal balance hereof, such reduction shall be made without a Make Whole Premium, provided no Event of Default then exists under the Loan Documents.

Borrower by adding its initials to the end of this paragraph, (A) expressly waives any rights it may have under California Civil Code Section 2954.10 to prepay this Note, in whole or in part, without penalty, upon acceleration of the Indebtedness and (B) acknowledges and agrees that Borrower has no right of prepayment of this Note, except as provided above; and that, if the maturity of this Note is accelerated by Lender, Borrower specifically agrees to pay as a prepayment premium, the applicable sum specified herein as the Make Whole Premium, specifically including but not limited to the case where the holder of this Note has accelerated the maturity of this note due to Borrower's default of any provision contained in 2(f) of the Deed of Trust.  By initialing this provision, Borrower hereby declares that Lender's agreement to make the Loan evidenced by this Note for the interest rate and for the term set forth in this Note con stitutes adequate consideration, given individual weight by Borrower, for this waiver and agreement.

Initials: ________________    ________________

4.

If any payment of principal, interest, or other Indebtedness is not made when due, damages will be incurred by Lender, including additional expense in handling overdue payments, the amount of which is difficult and impractical to ascertain.  Borrower therefor agrees to pay, upon demand, the sum of four cents ($.04) for each one dollar ($1.00) of each said payment which becomes overdue ("Late Charge") as a reasonable estimate of the amount of said damages, subject, however, to the limitations contained in paragraph 6 hereof.

Notwithstanding anything hereinabove to the contrary, the Late Charge assessed on any amount due on the Maturity Date or the Call Date (if Lender declares this Note due and payable as described hereinabove) but not then paid, whether or not by acceleration, shall not be four cents for each one dollar as described above, but shall instead be a sum equal to the interest which would have accrued on the principal balance then outstanding from the date the payment was due to the end of the month in which the Maturity Date or Call Date (if applicable) occurs.  Such Late Charge shall be in addition to interest otherwise accruing under this Note.

5.

If any Event of Default has occurred and is continuing under the Loan Documents, the entire principal balance of the Loan, interest then accrued, and Make Whole Premium, and all other Indebtedness whether or not otherwise then due, shall at the option of Lender, become immediately due and payable without demand or notice, and whether or not Lender has exercised said option, interest shall accrue on the entire principal balance, interest then accrued, Make Whole Premium and any other Indebtedness then due, at a rate equal to the Default Rate until fully paid.

6.

Notwithstanding anything herein or in any of the other Loan Documents to the contrary, no provision contained herein or therein which purports to obligate Borrower to pay any amount

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of interest or any fees, costs or expenses which are in excess of the maximum permitted by applicable law, shall be effective to the extent it calls for the payment of any interest or other amount in excess of such maximum.  All agreements between Borrower and Lender, whether now existing or hereafter arising and whether written or oral, are hereby limited so that in no contingency, whether by reason of demand for payment or acceleration of the maturity hereof or otherwise, shall the interest contracted for, charged or received by Lender exceed the maximum amount permissible under applicable law.  If, from any circumstance whatsoever, interest would otherwise be payable to Lender in excess of the maximum lawful amount, the interest payable to Lender shall be reduced to the maximum amount permitted under applicable law; and if from any circumstance Lender shall ever receive anything of value deemed interest by applicable law in excess of the ma ximum lawful amount, an amount equal to any excessive interest shall, at the option of Lender, be refunded to Borrower or be applied to the reduction of the principal hereof, without a Make Whole Premium and not to the payment of interest or, if such excessive interest exceeds the unpaid balance of principal hereof such excess shall be refunded to Borrower.  This paragraph shall control all agreements between Borrower and Lender.

7.

Borrower and any endorsers or guarantors waive presentment, protest and demand, notice of protest, demand and dishonor and nonpayment, and agree the Maturity Date of this Note or any installment may be extended without affecting any liability hereunder, and further promise to pay all reasonable costs and expenses, including but not limited to, reasonable attorney's fees incurred by Lender in connection with any default or in any proceeding to interpret and/or enforce any provision of the Loan Documents.  No release of Borrower from liability hereunder shall release any other maker, endorser or guarantor hereof.

8.

This Note is secured by the Loan Documents creating among other things legal and valid encumbrances on and an assignment of all of Borrower's interest in any Leases of the Premises located in the county of Los Angeles, State of California.  Capitalized terms used herein and not otherwise defined shall have those meanings given to them in the Loan Documents.  In no event shall such documents be construed inconsistently with the terms of this Note, and in the event of any discrepancy between any such documents and this Note, the terms hereof shall govern.  The proceeds of this Note are to be used for business, commercial, investment or other similar purposes, and no portion thereof will be used for any personal, family or household use.  This Note shall be governed by and construed in accordance with the laws of the State where the Premises is located, without regard to its conflict of law principles.

9.

Notwithstanding any provision to the contrary in this Note or the Loan Documents and except as otherwise provided for below, the liability of Borrower under the Loan Documents shall be limited to the interest of Borrower in the Premises and the Rents.  In the event of foreclosure of the liens evidenced by the Loan Documents, no judgment for any deficiency upon the Indebtedness evidenced by the Loan Documents shall be sought or obtained by Lender against Borrower.  Nothing herein shall in any manner limit or impair (i) the lien or enforcement of the Loan Documents pursuant to the terms thereof or (ii) the obligations of any indemnitor or guarantor, if any.

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Notwithstanding any provision hereinabove to the contrary, Borrower shall be personally liable to Lender for:

(a)

any loss or damage to Lender arising from (i) the sale or forfeiture of the Premises resulting from Borrower's failure to pay any of the taxes, assessments or charges specified in the Loan Documents or (ii) Borrower's failure to insure the Premises in compliance with the provisions of the Loan Documents;

(b)

any event or circumstance for which Borrower indemnifies Lender under the Environmental Indemnity;

(c)

nonpayment of taxes, assessments, insurance premiums and utilities for the Premises and any penalty or late charge associated with nonpayment thereof prior to the Sale (as defined below) of the Premises;

(d)

any loss or damage to the Premises as a result of waste, gross negligence or willful misconduct by Borrower;  

(e)

intentionally deleted;

Borrower's personal liability for items specified in (c) and (d) above shall be limited to the amount of rents, issues, proceeds and profits from the Premises ("Rents and Profits") received by Borrower for the twenty-four (24) months preceding an Event of Default and thereafter; but less any such Rents and Profits applied to (A) payment of principal, interest and other charges when due under the Loan Documents, or (B) payment of expenses for the operation, maintenance, taxes, assessments, utility charges and insurance of the Premises including sufficient reserves for the same or replacements or renewals thereof ("Operation Expense(s)") provided that (x) Borrower has furnished Lender with evidence reasonably satisfactory to Lender of the Operation Expenses and payment thereof, and (y) any payments to parties related to Borrower shall be considered an Operation Expense only to the extent that the amount expended for the Operation Expense does not exceed the then current market rate for such Operation Expense.

(f)

misapplication or misappropriation of rents in violation of the Loan Documents;  

(g)

any security deposits of tenants not otherwise applied in accordance with the terms of the Lease(s), together with any interest on such security deposits required by law or the leases, not turned over to Lender upon conveyance of the Premises to Lender pursuant to foreclosure or power of sale or by a deed acceptable to Lender in form and content;

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(h)

any loss or damage to Lender arising from the misapplication or misappropriation of tax reserve accounts, tenant improvement reserve accounts, security deposits, prepaid rents or other similar sums paid to or held by Borrower or any other entity or person in connection with Borrower’s operation of the Premises;

(i)

any insurance or condemnation proceeds or other similar funds or payments applied by Borrower in a manner other than as expressly provided in the Loan Documents;

(j)

any loss or damage to Lender arising from any fraud or willful misrepresentation by or on behalf of Borrower, Interest Owner or any guarantor regarding the Premises, the making or delivery of any of the Loan Documents or in any materials or information provided by or on behalf of Borrower, Interest Owner or guarantor, if any, in connection with the Loan; and

(k)

any loss or damage to Lender arising from the loss of Lender’s perfection or priority of its security interest in personal property or fixtures covered under any UCC financing statement due to borrower’s failure to notify Lender as provided for in paragraph 1(h) of the Mortgage.

Notwithstanding anything contained in paragraphs 9(a)(i) and 9(c) hereinabove as it relates solely to taxes, assessments and insurance premiums, to the extent Lender is impounding for taxes, assessments and insurance premiums in accordance with the Loan Documents and Borrower has fully complied with all terms and conditions of the Loan Documents relating to impounding for the same, then Borrower shall not be personally liable for Lender's failure to apply any of said impound amounts held by Lender in accordance with the Loan Documents.

Notwithstanding anything to the contrary in the Loan Documents, the limitation on liability contained in the first paragraph of this paragraph 9 SHALL BECOME NULL AND VOID and shall be of no further force and effect in the event:

(y)

of any breach or violation of paragraph 2(f) (due on sale or encumbrance) of the Mortgage, other than (i) the filing of a nonmaterial mechanic's lien affecting the Premises or a mechanic's lien affecting the Premises for which Borrower has complied with the provisions of paragraph 1(e) of the Mortgage, or (ii) the granting of any utility or other nonmaterial easement or servitude burdening the Premises, or (iii) any transfer or encumbrance of a nonmaterial economic interest in the Premises not otherwise set forth in (i) or (ii), or (iv) an immaterial breach or violation of the Property Transfer Requirements, Ownership Transfer Requirements, Specific Transfer Requirements I-V or the Mezzanine Financing Requirements; or

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(z)

of any filing by Borrower of a petition in bankruptcy or insolvency or a petition or answer seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under the Bankruptcy laws of the United States or under any other applicable federal, state or other statute or law.

10.

If more than one, all obligations and agreements of Borrower are joint and several.

11.

This Note may not be changed or terminated orally, but only by an agreement in writing and signed by the party against whom enforcement of any waiver, change, modification or discharge is sought.  All of the rights, privileges and obligations hereunder shall inure to the benefit of the heirs, successors and assigns of Lender and shall bind the heirs and permitted successors and assigns of Borrower.  

12.

If any provision of this Note shall, for any reason, be held to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision hereof, but this Note shall be construed as if such invalid or unenforceable provision had never been contained herein.

13.

This Note may be executed in counterparts, each of which shall be deemed an original; and such counterparts when taken together shall constitute but one agreement.

14.

This provision does not represent a commitment by Lender to lend additional dollars (the "Additional Advance") to Borrower, as Lender is under no obligation to make an Additional Advance. Borrower may request Lender to fund to Borrower an additional advance of principal ("Request for Advance"), provided the requested Additional Advance, in combination with the original Loan, meet certain "Minimum Economic Criteria" (set forth below).    

If Lender does choose to make an Additional Advance, the following conditions precedent must be satisfied:

The "Minimum Economic Criteria" are:

(a)

The combined outstanding Indebtedness on the original Loan and the Additional Advance does not exceed seventy-seven percent (77%) of the appraised value of the Premises as established by an appraisal of the Premises prepared by an MAI appraiser approved by Lender and in form and substance acceptable to Lender, said appraisal at Borrower's cost;

(b)

Debt service of coverage of 1.20 times the annual debt service on the combined outstanding Indebtedness on the original Loan and the Additional Advance, as determined by Lender.  The debt service coverage shall be the annual net operating income divided by the total annual installment payments due under the combined outstanding Indebtedness on the original Loan and the Additional Advance, including accrued or capitalized interest.  Only net operating income from approved executed Leases in effect

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on the Premises with no uncured defaults shall be used in Lender's determination of the foregoing.  Borrower shall provide a certified rent roll with its Request for Advance; and

(c)

At the time of the Request for Advance, at least twelve (12) months must remain in the Loan term.

Provided no Event of Default exists under the Loan Documents, if Lender determines that the Minimum Economic Criteria are satisfied, Lender may notify Borrower in writing ("Lender's Notice") of the number of basis points ("Spread") and the United States Treasury Issue ("Treasury Issue") that Lender will use to establish the interest rate applicable to the Additional Advance ("AA Interest Rate").  The Spread shall be determined by the Lender, in its sole discretion.

At any time and from time to time before the date that the AA Interest Rate is agreed to, provided at least seven (7) days have elapsed since the previous Lender's Notice, Lender may establish a new Spread which Lender anticipates it will use to establish the AA Interest Rate and notify Borrower of the same.  The AA Interest Rate must be established by the date which is 30 days following the date of the initial Lender's Notice (the "AA Rate Set Deadline").  The AA Interest Rate may only be established on a date mutually agreed to by Lender and Borrower. If Borrower fails to respond to the most current Lender's Notice in writing by the AA Rate Set Deadline, all of the Lender's Notices shall be deemed rejected.  If Borrower rejects the terms set forth in the Lender's Notice, Borrower shall then have the right to obtain Mezzanine Financing on the terms set forth in the Mortgage.  If Borrower accepts the terms set forth in Lender's Notice, Lender shall agree to fund the Additional Advance, provided the following closing conditions ("Closing Conditions") are met:

(a)

Borrower's execution, delivery, acknowledgement and recordation, as applicable, of acceptable documentation evidencing and securing the Additional Advance including, but not limited to, additional note(s), revised and/or replacement loan modification agreements, indemnification agreements, escrow security or property reserve agreements, security instruments, financing statements, UCCs, new or revised letters of credit and/or guarantees in form and substance satisfactory to Lender;

(b)

Receipt of either (at Lender's discretion) a new ALTA standard loan policy or an endorsement updating the Lender's existing loan policy in the full amount of the Loan (as increased by the Additional Advance), in form and by an issuer satisfactory to Lender, and which insures the Mortgage to be a first and prior lien subject only to those exceptions which were previously approved by Lender and provides coverage against usury and mechanic's liens (an acceptable usury opinion can be substituted for the usury coverage);

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(c)

Compliance with Lender's then current underwriting and closing due diligence requirements.

(d)

Receipt of acceptable third party reports addressing property physical and environmental condition, upon request of Lender, prepared by consultants acceptable to Lender;

(e)

Payment by Borrower of all third party expenses incurred, including but not limited to outside counsel fees and costs;

(f)

Payment of Borrower of an "Additional Advance Fee" equal to .5% of the amount of the Additional Advance.  The Additional Advance Fee is non-refundable and is due upon Borrower's acceptance of the terms set forth in the Lender's Notice.

In the event (i) Lender does not choose to make the Additional Advance; (ii) Borrower rejects the terms set forth in the Lender's Notice, or (iii) Borrower is unable to satisfy the Closing Conditions, Borrower shall have the ability to obtain Mezzanine Financing as more particularly described in paragraph 2(f) of the Mortgage.

(Signatures on next page)

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IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed and delivered as of the date first set forth above.

VMS NATIONAL PROPERTIES, an Illinois general partnership

By:

VMS NATIONAL RESIDENTIAL PORTFOLIO I, an Illinois limited partnership

By:

MAERIL, INC., a Delaware  

                        corporation, its general partner

       By: /s/Patti K. Fielding

       Name:  Patti K. Fielding

                Title:  Executive Vice President  

                           and Treasurer

By:

VMS NATIONAL RESIDENTIAL PORTFOLIO II, an Illinois limited partnership

By:

MAERIL, INC., a Delaware  

                        corporation, its general partner

       By: /s/Patti K. Fielding

       Name:  Patti K. Fielding

                Title:  Executive Vice President  

                                         and Treasurer

EX-10

Exhibit 10.12

Record and return to:

Principal Life Insurance Company

c/o Principal Real Estate Investors, LLC

801 Grand Avenue

Des Moines, IA  50392-1360

ATTN:  Erin Coghlan

DEED OF TRUST, SECURITY AGREEMENT

ASSIGNMENT OF RENTS AND FIXTURE FILING

THE NOTE SECURED BY THIS DEED OF TRUST CONTAINS AN

ADJUSTABLE INTEREST RATE

755505

A.

THIS DEED OF TRUST, SECURITY AGREEMENT AND ASSIGNMENT OF RENTS AND FIXTURE FILING (as the same may from time to time hereafter be modified, supplemented or amended, this "Deed of Trust") is made as of January 19, 2007, by and between VMS NATIONAL PROPERTIES, an Illinois general partnership, having its principal place of business and post office address at 4582 South Ulster Street Parkway, Suite 1100, Denver, Colorado 80237, as "Borrower" ("Borrower" to be construed as "Borrowers" if the context so requires), Brenda S. Tyler, of 801 Grand Avenue, Des Moines, Iowa, as "Trustee", and PRINCIPAL LIFE INSURANCE COMPANY, an Iowa corporation, as "Lender".

WITNESSETH:

B.

Borrower is justly indebted to Lender for money borrowed (the "Loan") in the original principal sum of Twenty-three Million Three Hundred Thousand and 00/100 Dollars ($23,300,000.00) (the "Loan Amount") evidenced by Borrower's secured promissory note of even date herewith, made payable and delivered to Lender (as may be modified, amended, supplemented, extended or consolidated in writing and any note(s) issued in exchange therefor or replacement thereof) (the "Note"), in which Note Borrower promises to pay to Lender the Loan Amount, together with all accrued and unpaid interest thereon, interest accrued at the Default Rate (if any), Late Charges (if any), the Make Whole Premium (if any), and all other obligations and liabilities due or to become due to Lender pursuant to the Loan Documents and all other amounts, sums and expenses paid by or payable to Lender pursuant to the Loan Docume nts and the Environmental Indemnity (collectively the "Indebtedness") until the Indebtedness has been paid, but in any event, the unpaid balance (if any) remaining due on the Note shall be due and payable on February 1, 2012 (the "Maturity Date") or such earlier date resulting from the

acceleration of the Indebtedness by Lender.  Capitalized terms used herein and not otherwise defined shall have those meanings given to them in the other Loan Documents.

C.

NOW, THEREFORE, to secure the payment of the Indebtedness in accordance with the terms and conditions of the Loan Documents, and all extensions, modifications, and renewals thereof and the performance of the covenants and agreements contained therein, and also to secure the payment of any and all other Indebtedness, direct or contingent, that may now or hereafter become owing from Borrower to Lender in connection with the Loan Documents, and in consideration of the Loan Amount in hand paid, receipt of which is hereby acknowledged, Borrower does by these presents irrevocably grant, transfer and assign in trust with power of sale and right of entry and possession unto Trustee, its successors and assigns forever, that certain real estate and all of Borrower's estate, right, title and interest therein, located in the county of Los Angeles, state of California, more particularly described in Exhibit A attached hereto and made a part hereof (the "Land"), which Land, together with the following described property, rights and interests, is collectively referred to herein as the "Premises".

D.

Together with Borrower's interest as lessor in and to all Leases and all Rents, which are pledged primarily and on a parity with the Land and not secondarily.

E.

Together with all and singular the tenements, hereditaments, easements, appurtenances, passages, waters, water courses, riparian rights, direct flow, ditch, reservoir, well and other water rights, whether or not adjudicated, whether tributary or nontributary and whether evidenced by deed, water stock, permit or otherwise, sewer rights, rights in trade names, licenses, permits and contracts, and all other rights, liberties and privileges of any kind or character in any way now or hereafter appertaining to the Land, including but not limited to, homestead and any other claim at law or in equity as well as any after-acquired title, franchise or license and the reversion and reversions and remainder and remainders thereof.

F.

Together with the right in the case of foreclosure hereunder of the encumbered property for Lender to take and use the name by which the buildings and all other improvements situated on the Premises are commonly known and the right to manage and operate the said buildings under any such name and variants thereof.

G.

Together with all right, title and interest of Borrower in any and all buildings and improvements of every kind and description now or hereafter erected or placed on the said Land and all materials intended for construction, reconstruction, alteration and repairs of such buildings and improvements now or hereafter erected thereon, all of which materials shall be deemed to be included within the Premises immediately upon the delivery thereof to the Premises, and all fixtures now or hereafter owned by Borrower and attached to or contained in and used exclusively in connection with the Premises including, but not limited to, all machinery, motors, elevators, fittings, radiators, awnings, shades, screens, all gas and electric fixtures, appliances (including without limitation, ranges, rangetops, ovens, stoves, cooking apparatus and appurtenances, dishwashers, refrigerators, trash compactors, microwaves, washers, dryers, and

garbage disposals), water heaters, mirrors, mantels, carpeting and all other floor coverings, window coverings and treatments, cable television equipment, water softeners, storm sashes, and all plumbing, heating, lighting, ventilating, refrigerating, incinerating, air-conditioning and sprinkler equipment and fixtures and appurtenances thereto; and all items of furniture, furnishings, equipment and personal property owned by Borrower used exclusively in the operation of the Premises; and all renewals or replacements of all of the aforesaid property owned by Borrower or articles in substitution therefor, whether or not the same are or shall be attached to said buildings or improvements in any manner (collectively, the "Improvements"); it being mutually agreed, intended and declared that all the aforesaid property owned by Borrower and placed by it on the Land or used exclusively in connection with the operation or maintenance of the Premi ses shall, so far as permitted by law, be deemed to form a part and parcel of the Land and for the purpose of this Deed of Trust to be Land and covered by this Deed of Trust, and as to any of the property aforesaid which does not form a part and parcel of the Land or does not constitute a "fixture" (as such term is defined in the Uniform Commercial Code ("UCC")), this Deed of Trust and the other Loan Documents (the terms of which grant a security interest in personal property or real property, the proceeds of which may become personal property) are each hereby deemed to be, as well, a security agreement under the UCC for the purpose of creating a security interest in all items, including, but not limited to, all property and rights which Borrower may grant, assign, bargain, sell, transfer, set over, deliver, or otherwise convey to Lender, as secured party, under the terms of this Deed of Trust or any of the other Loan Documents, including any and all proceeds thereof (as used herein, Borr ower shall mean "Debtor" under the UCC and Lender shall mean "Secured Party" under the UCC).  Borrower hereby appoints Lender as its attorney-in-fact to execute such documents necessary to perfect Lender's security interest and authorizes Lender at any time until the Indebtedness is paid in full, to prepare and file, at Borrower's expense, any and all UCC financing statements, amendments, assignments, terminations and the like, necessary to create and/or maintain a prior security interest in such property all without Borrower's execution of the same.  Furthermore, upon a default under the Loan Documents, Lender will, in addition to all other remedies provided for in the Loan Documents, have the remedies provided for under the UCC in effect in the state in which the Premises is located.

H.

Together with all right, title and interest of Borrower, now or hereafter acquired, in and to any and all strips and gores of land adjacent to and used in connection with the Premises and all right, title and interest of Borrower, now owned or hereafter acquired, in, to, over and under the ways, streets, sidewalks and alleys adjoining the Premises.  

I.

Together with all funds now or hereafter held by Lender under any property reserves agreement (including any proceeds derived from any letter of credit) or escrow security agreement or under any of the terms hereof or of the Loan Documents, including but not limited to funds held under the provisions of paragraph 5 hereof.

J.

Together with all of Borrower's payment intangibles, letter of credit rights, interest rate cap agreements, tenant in common agreement rights, and any other contract rights of Borrower related in any manner to the ownership, operation, or management of the Premises, as well as any

and all supporting obligations, and all proceeds, renewals, replacements and substitutions thereof.

K.

Together with all funds, accounts and proceeds thereof relating to the Premises whether or not such funds, accounts or proceeds thereof are held by Lender under the terms of any of the Loan Documents, including, but not limited to bankruptcy claims of Borrower against any tenant at the Premises, and any proceeds thereof; proceeds of any Rents, insurance proceeds from all insurance policies required to be maintained by Borrower under the Loan Documents and all awards, decrees, proceeds, settlements or claims for damage now or hereafter made to or for the benefit of Borrower by reason of any damage to, destruction of or taking of the Premises or any part thereof, whether the same shall be made by reason of the exercise of the right of eminent domain or by condemnation or otherwise (a "Taking").

L.

TO HAVE AND TO HOLD the same unto Trustee, Trustee's successors and assigns, upon the trusts, covenants and agreements herein expressed.  

M.

Borrower represents that it is the absolute owner in fee simple of the Premises described in Exhibit A, which Premises are free and clear of any liens or encumbrances except as set forth in the loan policy of title insurance for the Premises issued to Lender, and except for taxes which are not yet due or delinquent.  Borrower shall forever warrant and defend the title to the Premises against all claims and demands of all persons whomsoever and will on demand execute any additional instrument which may be required to give Trustee a valid first lien on all of the Premises, subject to the "Permitted Encumbrances" set forth in the loan policy of title insurance for the Premises issued to Lender.  

N.

Borrower further represents that (i) the Premises is not subject to any casualty damage; (ii) Borrower has not received any written notice of any eminent domain or condemnation proceeding affecting the Premises; (iii) all leasing broker fees and commissions payable by Borrower with respect to the Lease(s) have been paid in full, in cash or other form of immediately available funds; (iv) to the best of Borrower's knowledge, following due and diligent inquiry, there are no actions, suits or proceedings pending, completed or threatened against or affecting Borrower or any person or entity owning an interest (directly or indirectly) in Borrower ("Interest Owner(s)") or any property of Borrower or any Interest Owner in any court or before any arbitrator of any kind or before or by any governmental authority (whether local, state, federal or foreign) that, individually or in the aggregate, could reasonably be expected by Len der to be material to the transaction contemplated hereby and (v) the Premises and the intended uses thereof are in compliance with all applicable laws, regulations and ordinances, including without limitation, the Americans with Disabilities Act of 1990 (42 U.S.C. §12101, et seq.), the Federal Architectural Barriers Act (42 U.S.C. §3601, et seq.), the Fair Housing Amendments Act of 1988 (42 U.S.C. §3601, et seq.), and the Rehabilitation Act of 1973 (29 U.S.C. §794) and any amendments, modifications or supplements thereto.

O.

Borrower further represents and warrants that as of the date hereof and until the Indebtedness is paid in full

(a)

Borrower and each person or entity owning an interest in Borrower is not and will not be (i) identified on the Specially Designated Nationals and Blocked Persons List maintained by the Office of Foreign Assets Control, Department of the Treasury ("OFAC") and/or on any other similar list maintained by OFAC pursuant to any authorizing statute, executive order or regulation (collectively, the "List"), (ii) a person or entity with whom a citizen of the United States is prohibited to engage in transactions by any trade embargo, economic sanction, or other prohibition of United States law, regulation, or Executive Order of the President of the United States;

(b)

none of the funds or other assets of Borrower constitute or will constitute property of, or are or will be beneficially owned, directly or indirectly, by any Embargoed Person (as hereinafter defined);

(c)

no Embargoed Person has or will have any interest of any nature whatsoever in Borrower (whether directly or indirectly);

(d)

none of the funds of Borrower have been or will be derived from any unlawful activity with the result that the investment in Borrower is prohibited by law or that the Loan Documents are in or will be in violation of law,

(e)

Borrower has and will continue to implement procedures, and has consistently and will continue to consistently apply those procedures, to ensure the foregoing representations and warranties remain true and correct at all times.  The term "Embargoed Person" means any person, entity or government subject to trade restrictions under U.S. law, including but not limited to, the International Emergency Economic Powers Act, 50 U.S.C. §1701 et seq., The Trading with the Enemy Act, 50 U.S.C. App. 1 et seq., and any Executive Orders or regulations promulgated thereunder with the result that the investment in Borrower is prohibited by law or Borrower is in violation of law;

(f)

Borrower has complied and will continue to comply with all requirements of law relating to money laundering, anti-terrorism, trade embargos and economic sanctions, now or hereafter in effect;

(g)

Borrower has not and will not use funds from any "Prohibited Person" (as such term is defined in the September 24, 2001 Executive Order Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism) to make any payment due to Lender under the Loan Documents

Borrower will immediately notify Lender in writing if any of the representations, warranties or covenants are no longer true or have been breached or if Borrower has a reasonable basis to believe that they may no longer be true or have been breached.  In addition, Borrower will, at the request of Lender, provide such information as may be requested by Lender to determine Borrower's compliance with the terms hereof.

P.

Borrower further represents and warrants that as of the date hereof and until the Indebtedness is paid in full: (i) Borrower is not and will not be an "employee benefit plan" as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), which is subject to Title I of ERISA; (ii) the assets of Borrower do not and will not constitute "plan assets" of one or more such plans for purposes of Title I of ERISA; (iii) Borrower is not and will not be a "governmental plan" within the meaning of Section 3(32) of ERISA; (iv) transactions by or with Borrower are not and will not be subject to state statutes applicable to Borrower regulating investments of and fiduciary obligations with respect to governmental plans; (v) Borrower has made and will continue to make all required contributions to all employee benefit plans, if any, established for or on behalf of Borrower or to which Borrower is required to contribute; (vi) Borrower has and will continue to administer each such plan, if any, in accordance with its terms and the applicable provisions of ERISA and any other federal or state law; and (vii) Borrower has not and will not permit any liability under Sections 4201, 4243, 4062 or 4069 of Title IV of ERISA or taxes or penalties relating to any employee benefit plan or multi-employer plan to become delinquent or assessed, respectively, which would have a material adverse effect upon (i) the business or the financial position or results of operation of Borrower, (ii) the ability of Borrower to perform, or of Lender to enforce, any of the Loan Documents or Environmental Indemnity, or (iii) the value of the Premises.

BORROWER COVENANTS AND AGREES AS FOLLOWS:  

1.

Borrower shall

(a)

pay each item of Indebtedness secured by this Deed of Trust when due according to the terms of the Loan Documents;

(b)

pay a Late Charge on any payment of principal, interest, Make Whole Premium or Indebtedness which is not paid on or before the due date thereof to cover the expense involved in handling such late payment;

(c)

pay on or before the due date thereof any indebtedness permitted to be incurred by Borrower pursuant to the Loan Documents and any other claims which could become a lien on the Premises (unless otherwise specifically addressed in paragraph 1(e) hereof), and upon request of Lender exhibit satisfactory evidence of the discharge thereof;

(d)

complete within a reasonable time, the construction of any Improvements now or at any time in process of construction upon the Land;

(e)

manage, operate and maintain the Premises and keep the Premises, including but not limited to, the Improvements, in good condition and repair and free from mechanics' liens or other liens or claims for liens, provided however, that Borrower may in good faith, with reasonable diligence and upon written Notice to Lender within thirty (30) days after Borrower has knowledge of such lien or claim, contest the validity or amount of any such lien or claim and defer payment and discharge thereof during the pendency of such contest in the manner provided by law, provided that (i) such contest may be made without the payment thereof; (ii) such contest shall prevent the sale or forfeiture of the Premises or any part thereof, or any interest therein, to satisfy such lien or claim; (iii) Borrower shall have obtained a bond over such lien or claim from a bonding company acceptable to Lender which has the effect of removing such lien or collection of the claim or lien so contested; and (iv) Borrower shall pay all costs and expenses incidental to such contest; and further provided, that in the event of a final, non-appealable ruling or adjudication adverse to Borrower, Borrower shall promptly pay such claim or lien, shall indemnify and hold Lender and the Premises harmless from any loss or damage arising from such contest and shall take whatever action necessary to prevent sale, forfeiture or any other loss or damage to the Premises or to the Lender;  

(f)

comply, and cause each lessee or other user of the Premises to comply, with all requirements of law and ordinance, and all rules and regulations, now or hereafter enacted, by authorities having jurisdiction of the Premises and the use thereof, including but not limited to all covenants, conditions and restrictions of record pertaining to the Premises, the Improvements, and the use thereof (collectively, "Legal Requirements");

(g)

subject to the provisions of paragraph 6 hereof, promptly repair, restore or rebuild any Improvements now or hereafter a part of the Premises which may become damaged or be destroyed by any cause whatsoever, so that upon completion of the repair, restoration and rebuilding of such Improvements, there will be no liens of any nature arising out of the construction and the Premises will be of substantially the same character and quality as it was prior to the damage or destruction;

(h)

if other than a natural person, do all things necessary to preserve and keep in full force and effect its existence, franchises, rights and privileges under the laws of the state of its formation and, if other than its state of formation, the state where the Premises is located.  Borrower shall notify Lender at least thirty (30) days prior to (i) any relocation of Borrower's principal place of business to a different state or any change in Borrower's

state of formation, and/or (ii) if Borrower is an individual, any relocation of Borrower's principal residence to a different state;

(i)

do all things necessary to preserve and keep in full force and effect Lender's title insurance coverage insuring the lien of this Deed of Trust as a first and prior lien, subject only to the Permitted Encumbrances stated in the title insurance policy issued to Lender and any other exceptions after the date of this Deed of Trust approved in writing by Lender, including without limitation, delivering to Lender not less than 30 days prior to the effective date of any rate adjustment, modification or extension of the Note or any other Loan Document, any new policy or endorsement which may be reasonably required to assure Lender of such continuing coverage;

(j)

execute any and all documents which may be required to perfect the security interest granted by this Deed of Trust; and

(k)

comply and cause the Premises and the intended uses thereof to comply with all laws, rules, and regulations affecting the Premises or any portion thereof or any use thereof and, upon request by Lender, provide Lender with such evidence as may be reasonably required by Lender to confirm such compliance, such evidence to include, without limitation, letters, licenses, permits, certificates and other correspondence from the appropriate governmental authorities, and opinions or certifications from architects or engineers.  The laws, regulations and ordinances with which compliance should be evidenced include, in addition to the foregoing and without limitation, the following:  building codes, health and environmental protection laws, erosion control ordinances, federal statutes, doing business and/or licensing laws and zoning laws (the evidence submitted as to zoning should include the zoning designation made for the Premises, the permitted uses of the Premises under such zoning designation and zoning requirements as to parking, lot size, ingress, egress and building setbacks).

(l)

in the event Permitted Transfer (viii) of paragraph 2(f) occurs, remain a Single-Asset Entity;  

As used herein, the term Single-Asset Entity means:

a corporation, limited or general partnership, limited liability company, or business trust which, at all times until the Indebtedness is paid in full (i) will not have any other assets other than the Premises, cash and marketable securities, and (ii) will not create, assume, incur, guarantee or become liable for debt, obligations, or performance of obligations for the benefit of any other person or entity except

for liabilities incurred in the normal operation of the Premises (other than liabilities secured by the Premises).

2.

Borrower shall not:

(a)

except as required by applicable Legal Requirements, construct any building or structure nor make any alteration or addition (other than normal repair and maintenance) to (i) the roof or any structural component of any Improvements on the Premises, or (ii) the building operating systems, including but not limited to, the mechanical, electrical, heating, cooling, or ventilation systems (other than replacement with equal or better quality and capacity), without the prior written consent of Lender not to be unreasonably withheld;

(b)

remove or demolish any material Improvements, or any portion thereof, which at any time constitutes a part of the Premises.

Notwithstanding anything hereinabove to the contrary, Borrower may construct, remove or demolish tenant improvements within the then existing building(s) or other structures to the extent such work is required solely under the terms of any Leases approved by Lender provided (i) no Event of Default exists under the Loan Documents; (ii) the work is completed on a timely basis, in a good, workmanlike, lien-free manner and in accordance with all Legal Requirements, and (iii) such work does not negatively affect the structural integrity of the Improvements or the value of the Premises;

(c)

cause or permit any change to be made in the general use of the Premises without Lender's prior written consent;

(d)

initiate any or acquiesce to a zoning reclassification or material change in zoning without Lender's prior written consent.  Borrower shall use all reasonable efforts to contest any such zoning reclassification or change;

(e)

make or permit any use of the Premises that could with the passage of time result in the creation of any right of use, or any claim of adverse possession or easement on, to or against any part of the Premises in favor of any person or entity or the public;

(f)

allow any of the following to occur (unless a Permitted Transfer):

(i)

a Transfer of all or any portion of the Premises or any interest in the Premises;

(ii)

a Transfer of any ownership interest in Borrower or any entity which owns, directly or indirectly, an interest in Borrower at any level of the ownership structure; or

(iii)

in addition to (i) and (ii) above, if the Borrower is a trust, or if a trust owns an interest, directly or indirectly, in any entity which owns an interest in Borrower at any level of the ownership structure, the addition, deletion or substitution of a trustee of such trust.  

If any of such events occur, it shall be null and void and shall constitute an Event of Default under the Loan Documents.

It is understood and agreed that the Indebtedness evidenced by the Note is personal to Borrower and in accepting the same Lender has relied upon what it perceived as the willingness and ability of Borrower to perform its obligations under the Loan Documents and the Environmental Indemnity and as lessor under the Leases of the Premises.  Furthermore, Lender may consent to a Transfer and expressly waive Borrower's covenants contained in this paragraph 2(f), in writing to Borrower; however any such consent and waiver shall not constitute any consent or waiver of such covenants as to any Transfer other than that for which the consent and waiver was expressly granted.  Furthermore, Lender's willingness to consent to any Transfer and waive Borrower's covenants contained in this paragraph 2(f), implies no standard of reasonableness in determining whether or not such consent shall be granted and the same may be based upon what Lend er solely deems to be in its best interest.

For purposes of the Loan Documents, the following terms shall have the respective meanings set forth below:

"Transfer" or "Transferred" shall mean with respect to the Premises, an interest in the Premises, or an ownership interest or interest therein:

(i)

a sale, assignment, transfer, conveyance or other disposition (whether voluntary, involuntary or by operation of law);

(ii)

the creation, sufferance or granting of any lien, encumbrance, security interest or collateral assignment (whether voluntarily, involuntarily or by operation of law), other than the lien hereof, the leases of the Premises assigned to Lender, the Permitted Encumbrances and those liens which Borrower is contesting in accordance with the provisions of paragraph 1(e);

(iii)

the issuance or other creation of ownership interests in an entity;

(iv)

the reconstitution or conversion from one entity to another type of entity;

(v)

a merger, consolidation, reorganization or any other business combination; or

(vi)

a conversion to or operation of all or any portion of the Premises as a cooperative or condominium form of ownership.

"Permitted Transfer" shall mean:

(i)

a minor (as determined by Lender) conveyance of an interest in the Premises by Borrower, such as a utility easement, and for which Lender has given its prior written consent and imposed such conditions as Lender deems advisable and appropriate;

(ii)

a sale, assignment, transfer or conveyance of all or any portion of the Premises or an interest in the Premises for which Borrower has complied with all of the Property Transfer Requirements;

(iii)

any of the following Transfers for which Borrower has complied with all of the Ownership Transfer Requirements as applicable and Lender has given its prior written consent (and in connection with such consent, Lender may impose any conditions it wishes in its reasonable discretion);

(A)

a sale, assignment, transfer, or conveyance of an ownership interest or interest therein;

(B)

the issuance or other creation of ownership interests in an entity;

(C)

a reconstitution or conversion from one entity to another type of entity;

(D)

a merger, consolidation, reorganization or any other business combination;

(iv)

transfers of general partner interest in Borrower between VMS National Residential Portfolio I and VMS National Residential Portfolio II ("Borrower Interest Owners") for which Borrower has complied with all of the Specific Transfer Requirements I;

(v)

transfers of general partner interests in Borrower that represent less than 49%, individually or in the aggregate, of all ownership interests in Borrower to individuals or entities other than Borrower Interest Owners for which Borrower has complied with all of the Specific Transfer Requirements II;

(vi)

Borrower's right to obtain mezzanine financing for which Borrower has complied with all the Mezzanine Financing Requirements;

(vii)

any assumption of less than 100% of the limited partnership interests in Borrower Interest Owners by any affiliate of AIMCO REIT for which Borrower has complied with all of the Specific Transfer Requirements III;

(viii)

conversion of the Borrower to a Single Asset Entity (as defined in paragraph 1(l)) wholly owned by AIMCO REIT and/or AIMCO OP and transfer of the Premises to said Single Asset Entity for which Borrower has complied with all of the Specific Transfer Requirements IV;

(ix)

a transfer of any general partnership interest in Borrower to a Qualified REIT Subsidiary, as defined in Section 856(i)(2) of the Internal Revenue Code of 1986, 100% owned by AIMCO REIT or to a Qualified REIT Subsidiary, as defined in Section 856(e)(1) of the Internal Revenue Code of 1986, 100% owned by AIMCO OP for which Borrower has complied with all of the Specific Transfer Requirements V;

(ix)

a transfer of shares of common stock, limited partnership interests or other beneficial or ownership interests or other forms of securities in AIMCO REIT or AIMCO OP (defined below), and the issuance of all varieties of convertible debt, equity and other similar securities of AIMCO REIT or AIMCO OP, and the subsequent transfer of such securities; provided, however, that no Change of Control (defined below) occurs as a result of such transfer, either upon such transfer or upon the subsequent conversion to equity of such convertible debt or other securities.

(x)

The issuance by AIMCO REIT or AIMCO OP of additional common stock, limited partnership interests or other beneficial or ownership interests, convertible debt, equity and other similar securities, and the subsequent transfer of such convertible debt or securities; provided, however, that no Change of Control occurs as the result of such transfer, either upon such transfer or upon the subsequent conversion to equity of such convertible debt or other securities.

(xi)

So long as AIMCO REIT owns 100% of the stock of AIMCO-LP, Inc. and AIMCO-GP, Inc. (and AIMCO-GP, Inc. remains the general partner of AIMCO OP), a transfer of limited partnership interests that results in AIMCO-LP, Inc. owning not less than 50.1% of the limited partnership interests in AIMCO OP.

For purposes of this Permitted Transfer Section, the following terms shall

be defined as follows:

(A)

"Change of Control" shall mean the earliest to occur of (1) the date an Acquiring Person becomes (by acquisition, consolidation, merger or otherwise), directly or indirectly, the beneficial owner of more than forty percent (40%) of the total Voting Equity Capital of AIMCO REIT then outstanding, or (2) the date on which AIMCO REIT shall

cease to hold (whether directly or indirectly through a wholly owned intermediary entity such as AIMCO-LP, Inc. or AIMCO-GP, Inc.) at least 50.1% of the limited partnership interests in AIMCO OP, or (3) the date on which AIMCO REIT shall cease for any reason to hold (whether directly or indirectly) (i) the interests in the Managing General Partner held as of the date of this Deed of Trust (as evidenced by organizational charts and documents submitted to Lender as of such date) and (ii) the Controlling Interest(s) in the Borrower, or (4) the replacement (other than solely by reason of retirement at age sixty-five or older, death or disability) of more than 50% (or such lesser percentage as is required for decision making by the board of directors of trustees, if applicable) of the members of the board of directors (or trustee, if applicable) of AIMCO REIT over a one-year period where such replacement shall not have been approved by a vote of at least a majority of the board of directors (or trustees, if applicable) of AIMCO REIT then still in office who either were members of such board of directors (or trustees, if applicable) at the beginning of such one year period or whose election as members of the board of directors (or trustees, if applicable) was previously so approved.

(B)

"Acquiring Person" shall mean a "person" or, group of "persons" within the meaning of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended. However, notwithstanding the foregoing, "Acquiring Person" shall not be deemed to include any member of the Borrower Control Group unless such member has, directly or indirectly, disposed of, sold or otherwise transferred to, or encumbered or restricted (whether by means of voting trust agreement or otherwise) for the benefit of an Acquiring Person, all or any portion of the Voting Equity Capital of AIMCO RElT directly or indirectly owned or controlled by such member or such member directly or indirectly votes all or any portion of the Voting Equity Capital of AIMCO REIT, directly or indirectly, owned or controlled by such member for the taking of any action which, directly or indirectly constitutes or would result in a Change of Cont rol, in which event such member of the Borrower Control Group shall be deemed to constitute an Acquiring Person to the extent of the Voting Equity Capital of AIMCO REIT owned or controlled by such member.

(C)

"Borrower Control Group" shall mean a majority of the Board of Directors of AIMCO REIT.

(D)

A "Person" shall mean an individual, an estate, a trust, a corporation, a partnership, a limited liability company or any other organization or entity (whether governmental or private).

(E)

"Security" shall have the same meaning as in Section 2(1) of the Securities Act of 1933, as amended.

(F)

"Controlling Interest(s)" shall mean (i) with respect to a partnership, such majority and/or managing general partner interests which, together with a majority of limited partnership interests if necessary for consent purposes, vest in the holder of such interests the sale power, right and authority to control the day to day operations of the Borrower; including, without limitation, the authority to manage, operate and finance the Premises, (ii) with respect to a corporation, the number of shares which entitle the holder to elect a majority of the board of directors of the Borrower, and (iii) with respect to a limited liability company, such majority and/or managing member interests as vest in the holder of such interests the sole power, right and authority to control the day to day operations of the Borrower; including, without limitation, the authority to manage, operate and finance the Premises.

(G)

"AIMCO REIT" shall mean Apartment Investment and Management Company, a corporation organized and existing under the laws of the State of Maryland.

(H)

"AIMCO OP" shall mean AIMCO Properties, L.P., a limited partnership organized and existing under the laws of the State of Delaware.

(I)

"Managing General Partner" shall mean the entity executing this Deed of Trust on behalf of the Borrower and/or its successors or assigns in interest.

(J)

"Voting Equity Capital" shall mean securities of any class or classes, the holders of which are ordinarily, in the absence of contingencies, entitled to elect a majority of the

board of directors (or Persons performing similar functions).

"Property Transfer Requirements" are all of the following:

1.

Prior review and approval of the proposed purchaser or other transferee and the subject transaction by Lender, at Lender's reasonable discretion.  Review of the proposed purchaser or other transferee and the subject transaction shall encompass various factors, including, but not limited to, the proposed purchaser's or other transferee's creditworthiness, financial strength, and real estate management and leasing expertise as well as the proposed transaction's effect on the Premises, the Borrower, and other security for the Loan;

2.

Payment to Lender of an assumption fee equal to one percent (1%) of the principal balance of the Note; provided, however, that Lender will require up to $15,000.00 of such fee to be paid at the beginning of Lender's review process, and such sum shall be nonrefundable and earned upon receipt by Lender whether or not the transaction is ultimately completed or Lender ultimately approves the proposed purchaser or other transferee;

3.

Receipt, at Borrower's expense, of either (at Lender's discretion) a new ALTA standard loan policy or an endorsement updating the Lender's existing loan policy in the full amount of the Loan, in form and by an issuer satisfactory to Lender, and which insures this Deed of Trust to be a first and prior lien subject only to those exceptions which were previously approved by Lender and provides coverage against usury and mechanic's liens;

4.

Receipt by Lender of copies of all relevant information and documentation relating to or required by Lender in connection with the proposed transfer including but not limited to (a) the organizational documents of the proposed transferee and an opinion of counsel satisfactory to Lender as to its due formation, valid existence and authority to enter into and carry out the proposed transaction; (b) the deeds or other instruments of transfer and documents relating to the assignment and assumption of Leases; (c) evidence of compliance with the insurance requirements contained in the Loan Documents; and (d) compliance with such other closing requirements as are customarily imposed by Lender in connection with such transactions;

5.

Execution, delivery, acknowledgment and recordation, as applicable, of new, revised and/or replacement assumption agreements, loan modification agreements, indemnification agreements, escrow security or property reserves agreements, security instruments, financing statements, UCCs, new or revised letters of credit and/or guarantees in form and substance reasonably satisfactory to Lender;

6.

Payment of outside counsel fees and costs, other applicable professional's fees and costs, taxes, recording fees and the like, and any other fees and costs incurred; and

7.

Receipt by Lender of 60 days advance written notice of the proposed Transfer in question.

"Ownership Transfer Requirements" are all of the Property Transfer Requirements which Lender deems appropriate in its reasonable discretion, as well as a reasonable processing fee to be determined by Lender; provided, however, that (i) with respect to item 2 of the Property Transfer Requirements, the 1% fee shall be prorated (subject, however, to a $15,000 minimum) based on Lender's calculation of the effective percentage interest in Borrower transferred, and (ii) item 3 of the Property Transfer Requirements shall be required, at Lender's reasonable discretion, only in the event of (A) a merger, consolidation, reorganization or any other business combination, or (B) a reconstitution or conversion from one entity to another type of entity.

"Specific Transfer Requirements I" are all of the following:  

1.

AIMCO REIT (as defined below) and/or AIMCO OP (as defined below) (collectively) retain 20% indirect ownership interest in and retain management and control of Borrower and there is no change in the management and day-to-day operations at the Premises, unless otherwise approved by Lender;

2.

Lender receives notice of such transfer within thirty (30) days of the consummation of such transfer; and

3.

Lender receives an organizational chart for Borrower which includes ownership breakdowns for all entity levels and is certified by Borrower as true and correct.

Specific Transfer Requirements II are all of the following:

1.

AIMCO REIT and/or AIMCO OP (collectively) retain 20% indirect ownership interest in and retain management and control of Borrower and there is no change in the management and day-to-day operations at the Premises, unless otherwise approved by Lender;

2.

Lender receives notice of such transfer within thirty (30) days of the consummation of such transfer along with the organizational documents of the transferee;

3.

At Lender's option, Lender receives an acceptable background and credit check, at Borrower's cost, for the proposed transferee if said proposed transferee's interest in Borrower will equal or exceed 20%;

4.

At Lender's option, Lender receives an acceptable OFAC report (research of the Office of Foreign Assets Control "Watched" companies list), at Borrower's cost;

5.

Lender receives an organizational chart for Borrower which includes ownership breakdowns for all entity levels and is certified by Borrower as true and correct; and

6.

Lender receives payment of an assumption fee equal to the greater of: (a) one-half percent (0.5%) of the outstanding principal balance of the Note prorated based on Lender's calculation of the effective percentage interest in Borrower transferred; or (b) $3,000.00.

Specific Transfer Requirements III are all of the following:

1.

AIMCO REIT and/or AIMCO OP (collectively) retain 20% indirect ownership interest in and retain management and control of Borrower and there is no change in the management and day-to-day operations at the Premises, unless otherwise approved by Lender;

2.

Lender receives notice of such transfer within thirty (30) days of the consummation of such transfer;

3.

Lender receives an organizational chart for Borrower which includes ownership breakdowns for all entity levels and is certified by Borrower as true and correct; and

4.

Lender receives a processing fee of $500.00.

Specific Transfer Requirements IV are all of the following:

1.

Property Transfer Requirements 3-7; and

2.

Lender receives a processing fee of $3,000.00.

Specific Transfer Requirements V are all of the following:

1.

AIMCO REIT and/or AIMCO OP (collectively) retain 20% indirect ownership interest in and retain management and control of

Borrower and there is no change in the management and day-to-day operations at the Premises, unless otherwise approved by Lender;

2.

Lender receives notice of such transfer within thirty (30) days of the consummation of such transfer along with the organizational documents of the transferee;

3.

At Lender's option, Lender receives an acceptable background and credit check, at Borrower's cost, for the proposed transferee if said proposed transferee's interest in Borrower will equal or exceed 20%;

4.

At Lender's option, Lender receives an acceptable OFAC report (research of the Office of Foreign Assets Control "Watched" companies list), at Borrower's cost;

5.

Lender receives an organizational chart for Borrower which includes ownership breakdowns for all entity levels and is certified by Borrower as true and correct; and

6.

Lender receives payment of a processing fee of $1,000.00.

"Mezzanine Financing Requirements" are all of the following:

(i)

no Event of Default has occurred under the Loan Documents;

(ii)

the mezzanine borrower may not be Borrower;

(iii)

the mezzanine debt is used solely to reimburse the mezzanine borrower for the costs associated with the repair and/or improvement of the Premises subject to the terms and conditions of the Loan Documents;

(iv)

the combined outstanding Indebtedness on the Loan and proposed mezzanine financing does not exceed eighty percent (80%) of the appraised value of the Premises as calculated by Lender at the time of funding of the mezzanine financing or at Lender's option as established by an appraisal of the Premises prepared by an MAI appraiser approved by Lender and in form and substance acceptable to Lender, which appraisal shall be paid for by Borrower;

(v)

a minimum of 1.05 debt service coverage, based on a 30-year amortization schedule, is maintained.  The debt service coverage shall be the annual net cash flow (annual net operating income after deduction for tenant improvements, leasing commissions, annual replacement reserves and a management fee) divided by the total annual installment payments due under the Note secured hereby and on any proposed mezzanine financing including accrued or capitalized interest.  Only net operating income from

approved executed leases in effect on the Premises with no uncured defaults shall be used in Lender's determination of the annual net cash flow;  

(vi)

the only security for the mezzanine financing is a pledge of ownership interests in Borrower or an owner of Borrower, directly or indirectly and such financing does not encumber nor result in any lien or charge upon or against the Premises or the Rents; and

(vii)

Lender's reasonable approval of the mezzanine lender as well as any successor or assign of mezzanine lender, any of which must be an institutional lender;

(viii)

Lender's reasonable approval of the mezzanine financing loan documents;

(ix)

Execution by the mezzanine lender of an inter-creditor agreement in form and substance acceptable to Lender;

(x)

neither Guarantor nor Borrower may be a guarantor of the mezzanine financing;

(xi)

at Lender's option, if required by the procedures promulgated by any rating agency(s) associated with a securitization transaction, evidence in writing to the effect that such mezzanine financing will not result in a re-qualification, reduction or withdrawal of any rating in effect immediately prior to the obtaining of the mezzanine financing issued in connection with the applicable securitization transaction;

(xii)

Borrower pays to Lender a reasonable fee for the handling and processing of such financing and reimburses Lender for all costs and expenses incurred by Lender, including but not limited to outside counsel fees and costs; and

(xiii)

the right to obtain mezzanine debt is personal to VMS National Properties and any successor borrower directly or indirectly wholly owned by AIMCO REIT and/or AIMCO OP and may not be exercised by any successor or assign of Borrower other than a successor borrower directly or indirectly wholly owned by AIMCO REIT and/or AIMCO OP.

(g)

allow all or any portion of the Premises to be operated as or converted to a cooperative or condominium form of ownership;

(h)

amend, alter, modify, terminate or assign that certain Property Management Agreement by and between Borrower, and NHPMN Management, LP dated January 1, 2003 as amended by Amendment of Management Agreement dated November 9, 2006, now in existence or any subsequent agreement hereafter entered into with respect to the Premises (the "Property Management Agreement");

(i)

permit the property and leasing manager to assign or sell the Property Management Agreement; or

(j)

replace the current property and leasing manager or Property Management Agreement without the prior consent of Lender.

3.

(a)

Borrower shall pay or cause to be paid when due and before any penalty attaches or interest accrues all general taxes, special taxes, assessments (including assessments for benefits from public works or improvements whenever begun or completed), utility charges, water charges, sewer service charges, common area maintenance charges, if any, vault or space charges and all other like charges against or affecting the Premises or against any property or equipment located on the Premises, or which might become a lien on the Premises, and shall, within 15 days following Lender's request, furnish to Lender a duplicate receipt of such payment.  If any such tax, assessment or charge may legally be paid in installments, Borrower may, at its option, pay such tax, assessment or charge in installments.  

(b)

If Borrower desires to contest any tax, assessment or charge relating to the Premises, Borrower may do so by paying the same in full, under protest, in the manner provided by law; provided, however, that

(i)

if contest of any tax, assessment or charge may be made without the payment thereof, and

(ii)

such contest shall have the effect of preventing the collection of the tax, assessment or charge so contested and the sale or forfeiture of the Premises or any part thereof or any interest therein to satisfy the same,

then Borrower may in its discretion and upon the giving of written notice to Lender of its intended action and upon the furnishing to Lender of such security or bond as Lender may require, contest any such tax, assessment or charge in good faith and in the manner provided by law.  All costs and expenses incidental to such contest shall be paid by Borrower.  In the

event of a ruling or adjudication adverse to Borrower, Borrower shall promptly pay such tax, assessment or charge.  Borrower shall indemnify and save harmless the Lender and the Premises from any loss or damage arising from any such contest and shall, if necessary to prevent sale, forfeiture or any other loss or damage to the Premises or to Lender, pay such tax, assessment or charge or take whatever action is necessary to prevent any sale, forfeiture or loss.  

4.

(a)

Borrower shall at all times keep or cause to be kept in force (i) property insurance insuring all Improvements which now are or hereafter become a part of the Premises for perils covered by a causes of loss-special form insurance policy, including coverage against terrorism and containing replacement cost, ordinance and law and agreed amount endorsements or equivalent coverage; (ii) commercial general liability insurance naming Lender as an additional insured protecting Borrower and Lender against liability for bodily injury or property damage occurring in, on or adjacent to the Premises, with a combined single limit of not less than One Million Dollars ($1,000,000) per occurrence with not less than a Two Million Dollar ($2,000,000) aggregate limit and excess umbrella liability insurance of not less than Fifteen Million Dollars ($15,000,000); (iii) boiler and machinery insurance if the property has a boiler or is an office building; (iv) rental value insurance for the perils specified herein for one hundred percent (100%) of the Rents (including operating expenses, real estate taxes, assessments and insurance costs which are lessee's liability) for a period of twelve (12) months; (v) builders risk insurance during all periods of construction; and (vi) insurance against all other hazards as may be reasonably required by Lender, including, without limitation, insurance against loss or damage by flood.

(b)

All insurance (including deductibles and exclusions) shall be in form, content and amounts reasonably approved by Lender and written by an insurance company or companies approved by Lender and rated A-, class size VIII or better in the most current issue of Best's Insurance Reports and which is licensed to do business in the state in which the Premises are located or a governmental agency or instrumentality approved by Lender.  The policies for such insurance shall have attached thereto standard mortgagee clauses in favor of and permitting Lender to collect any and all proceeds payable thereunder and shall include a 30 day (except for nonpayment of premium, in which case, a 10 day) notice of cancellation clause in favor of Lender.  All certificates of insurance (or duplicate originals of policies if requested by Lender) shall be delivered to and held by Lender as further security for the payment of the Note and any other ob ligations arising under the Loan Documents, with evidence of renewal coverage delivered to Lender at least 30 days before the expiration date of

any policy.  Borrower shall not carry or permit to be carried separate insurance, concurrent in kind or form and contributing in the event of loss, with any insurance required in the Loan Documents.

5.

(a)

Upon the occurrence of an Event of Default, Borrower shall deposit with and pay to Lender, on each payment date specified in the Note, sums calculated by Lender for payment of the following as they become due and payable:  (i) the estimated taxes and assessments assessed or levied against the Premises, and (ii) the estimated premiums for insurance required by the Loan Documents, excluding commercial general liability insurance.  Lender shall use such deposits to pay the taxes, assessments and premiums when the same become due.  Borrower shall procure and deliver to Lender, in advance, statements for such charges.  If the total payments made by Borrower under this paragraph exceed the amount of payments actually made by Lender for taxes, assessments and insurance premiums, such excess shall be credited by Lender on subsequent deposits to be made by Borrower.  If, however, the deposits are insufficient to pay t he taxes, assessments and insurance premiums when the same shall be due and payable, Borrower will pay to Lender any amount necessary to make up the deficiency, five (5) business days before the date when payment of such taxes, assessments and insurance premiums shall be due.  If at any time Borrower shall tender to Lender, in accordance with the provisions of the Note secured by this Deed of Trust, full payment of the entire Indebtedness represented thereby, Lender shall, in computing the amount of such Indebtedness, credit to the account of Borrower any balance remaining in the funds accumulated and held by Lender under the provisions of this paragraph.  If there is an Event of Default resulting in a public sale of the Premises, or if Lender otherwise acquires the Premises after an Event of Default, Lender shall apply, at the time of commencement of such proceedings, or at the time the Premises is otherwise acquired, the balance then remaining in the funds accumulated under this paragraph as a cr edit toward any delinquent or accrued taxes and then in such priority as Lender elects to the other Indebtedness.

(b)

Any funds held under this paragraph shall not constitute any deposit or account of the Borrower or moneys to which the Borrower is entitled upon demand, or upon the mere passage of time.  Lender shall not be required to segregate such deposits and may hold such deposits in its general account or any other account and may commingle such deposits with any other moneys of Lender or moneys which Lender is holding on behalf of any other person or entity.

6.

In the event of any damage to or destruction of the Premises, or any part thereof:

(a)

Borrower will immediately notify Lender thereof in the manner provided in this Deed of Trust for the giving of notices.  Lender shall have the right (which may be waived by Lender in writing) to settle and adjust any claim under such insurance policies required to be maintained by Borrower.  In all circumstances, the proceeds thereof shall be paid to Lender and Lender is authorized to collect and to give receipts therefor.  Borrower agrees and acknowledges that such proceeds shall be held by Lender without any allowance of interest and that in any bankruptcy proceeding of Borrower, all such proceeds shall be deemed to be "Cash Collateral" as that term is defined in Section 363 of the Bankruptcy Code.  Provided that no Event of Default exists, Borrower shall have the right to participate in any settlement or adjustment; provided, however, that any settlement or adjustment where the aggregate amount of suc h proceeds equals or exceeds $500,000 shall be subject to the written approval of Lender, not to be unreasonably withheld.

(b)

Such proceeds, after deducting therefrom any reasonable expenses incurred by Lender in the collection thereof (including but not limited to reasonable attorneys' fees and costs), shall be applied by Lender to pay the Indebtedness secured hereby including, but not limited to the Make Whole Premium, whether or not then due and payable, provided, however, that if no Event of Default exists at the time of such application or the application occurs during the Open Period, no Make Whole Premium shall be due.

Notwithstanding anything hereinabove to the contrary,

(i)

in the event the casualty occurs more than three (3) months prior to the Maturity Date and no Event of Default exists, Lender shall apply such proceeds as follows outlined below; provided, further, that Lender's rights in this subparagraph are subject to Borrower's rights to use such proceeds for rebuilding and restoring the buildings and improvements as may be required or permitted by law in effect at the time of the loss:

(A)

If the aggregate amount of such proceeds is less than $500,000, Lender shall pay such proceeds directly to Borrower, to be held in trust for Lender and applied to the cost of rebuilding and restoring the Premises.

(B)

If the aggregate amount of such proceeds equals or exceeds $500,000 Lender shall disburse such amounts of the proceeds as Lender reasonably deems necessary for the repair or replacement of the Premises, subject to the conditions set forth in 6(c) below.

(ii)

in the event (x) an Event of Default exists, or (y) the casualty occurs during the last three (3) months prior to the Maturity Date and Lender determines that the repair and restoration of such casualty cannot be completed prior to the Maturity Date, or (z) the conditions set forth in 6(c) are not met, then Lender, in its sole and absolute discretion may either:

(A)

declare the entire Indebtedness to be immediately due and payable, provided, however, that if no Event of Default exists or the loan term is in the Open Period, no Make Whole Premium shall be due.  All proceeds shall be applied toward payment of the Indebtedness in such priority as Lender elects; or

(B)

disburse such proceeds as Lender reasonably deems necessary for the repair or replacement of the Premises subject to those conditions set forth in 6(c) which Lender in its sole and absolute discretion may require.

(c)

(i)

In the event that Borrower is to be reimbursed out of the insurance proceeds or out of any award or payment received with respect to a Taking, Lender shall from time to time make available such proceeds, subject to the following conditions: (a) there continues to exist no Event of Default; (b) the delivery to Lender of satisfactory evidence of the estimated cost of completion of such repair and restoration work and any architect's certificates, waivers of lien, contractor's sworn statements, and other evidence of cost and of payment and of the continued priority of the lien hereof over any potential liens of mechanics and materialmen (including, without limitation, title policy endorsements) as Lender may reasonably require and approve; (c) the time required to complete the repair and restoration work and for the income from the Premises to return to the level it was prior to the loss will not exceed the coverage period of the rental value insurance required hereunder; (d) the annual net operating income shall equal or exceed 1.20 times the annual debt service on the Note.  Only net operating income from approved executed Leases in effect on the Premises, with no uncured defaults, shall be used in Lender's determination of the annual net operating income; (e) Lender approves the plans and specifications of such work before such work is commenced if the estimated cost of rebuilding and restoration exceeds 25% of the Indebtedness or involves any structural changes or modifications, which approval shall not be unreasonably withheld; (f) if the

amount of any insurance proceeds, award or other payment is insufficient to cover the cost of restoring and rebuilding the Premises, Borrower shall pay such cost in excess of such proceeds, award or other payment before being entitled to reimbursement out of such funds; (g) Borrower pays to Lender a non-refundable processing fee equal to the greater of $5,000.00 or .25% of the amount of such proceeds within sixty (60) days of the occurrence of any such damage or destruction and before Lender disburses any proceeds; and (h) such other conditions to such disbursements, in Lender's reasonable discretion, as would be customarily required by a construction lender doing business in the area where the Premises is located or which are otherwise required by any rating agency rating a securitization transaction with respect to the Loan.

(ii)

No payment made by Lender prior to the final completion of the repair or restoration work shall, together with all payments theretofore made, exceed 90% of the cost of such work performed to the time of payment, and at all times the undisbursed balance of said proceeds shall be at least sufficient to pay for the cost of completion of such work free and clear of all liens.  Any proceeds remaining after payment of the cost of rebuilding and restoration shall be paid to Borrower so long as no Event of Default has occurred and is continuing.

(iii)

Repair and restoration of the Premises shall be commenced promptly after the occurrence of the loss and shall be prosecuted to completion diligently, and the Premises shall be so restored and rebuilt to substantially the same character and quality as prior to such damage and destruction and shall comply with all Legal Requirements.

(d)

Should such damage or destruction occur after foreclosure or sale proceedings have been instituted, the proceeds of any such insurance policy or policies, if not applied in rebuilding or restoration of the Improvements, shall be used to pay (i) the Indebtedness then due and owing in the event of a non-judicial sale in such priority as Lender elects, or (ii) the amount due in accordance with any decree of foreclosure or deficiency judgment that may be entered in connection with such proceedings, and the balance, if any, shall be paid to the owner of the equity of redemption if it shall then be entitled to the same, or otherwise as any court having jurisdiction may direct.

7.

In the event of the commencement of a Taking affecting the Premises:

(a)

Borrower shall notify Lender thereof in the manner provided in this Deed of Trust for the giving of notices.  Lender may participate in such proceeding, and Borrower shall deliver to Lender all documents requested by it to permit such participation.

(b)

Borrower shall cause the proceeds of any award or other payment made relating to a Taking, to be paid directly to Lender.  Lender, in its sole and absolute discretion: (i) may apply all such proceeds to pay the Indebtedness in such priority as Lender elects, provided however, that if no Event of Default exists at the time of such application no Make Whole Premium shall be due; or (ii) subject to and in accordance with the provisions set forth in paragraph 6(c) above, may disburse such amounts of the proceeds as Lender reasonably deems necessary for the repair or replacement of the Premises.

Notwithstanding anything herein above to the contrary, provided no Event of Default exists, Lender agrees to disburse the proceeds received from any Inconsequential Taking, as hereinafter defined, to Borrower for the repair and/or replacement of the Premises.  An Inconsequential Taking shall be a Taking which (i) results in less than $100,000 in proceeds; (ii) does not, in Lender's determination, materially or adversely affect the Improvements, parking, access, ingress, egress or use of the Premises; and (iii) does not trigger any rights or options of tenants under the Leases.   

8.

If by the laws of the United States of America or of any state or governmental subdivision having jurisdiction over Borrower or of the Premises or of the Loan evidenced by the Loan Documents or any amendments or modifications thereof, any tax or fee is due or becomes due or is imposed upon Lender in respect of the issuance of the Note hereby secured or the making, recording and registration of this Deed of Trust or otherwise in connection with the Loan Documents, the Environmental Indemnity or the Loan, except for Lender's income or franchise tax, Borrower covenants and agrees to pay such tax or fee in the manner required by such law, and to hold harmless and indemnify Trustee and Lender, their successors and assigns, against any liability incurred by reason of the imposition of any such tax or fee.  

9.

(a)

Upon the occurrence of any Event of Default, Lender may, but need not, make any payment or perform any act herein required of Borrower, in any form and manner deemed expedient and may, but need not, make full or partial payments of principal or interest on prior encumbrances, if any, and purchase, discharge, compromise or settle any tax lien or other prior lien or title or claim thereof, or redeem from any tax sale or forfeiture affecting said Premises, or contest any tax or assessment.  All moneys paid for any of the purposes herein authorized and all reasonable expenses paid or

incurred in connection therewith, including but not limited to, reasonable attorneys' fees and costs and reasonable attorneys' fees and costs on appeal, and any other money advanced by Lender to protect the Premises and the lien hereof, shall be so much additional Indebtedness secured hereby and shall become immediately due and payable without notice and with interest thereon at the Default Rate from the date of expenditure or advance until paid.  

(b)

In making any payment hereby authorized relating to taxes or assessments or for the purchase, discharge, compromise or settlement of any prior lien, Lender may make such payment according to any bill, statement or estimate secured from the appropriate public office without inquiry into the accuracy thereof or into the validity of any tax, assessment, sale, forfeiture, tax lien or title or claim thereof or without inquiry as to the validity or amount of any claim for lien which may be asserted.  

10.

If one or more of the following events (herein called an "Event of Default" or "Events of Default" as the context so requires) shall have occurred:  

(a)

failure to pay when due any principal, interest, Make Whole Premium or other Indebtedness, utilities, taxes or assessments or insurance premiums required pursuant to the Loan Documents or the Environmental Indemnity, and such failure shall have continued for 5 days; or

(b)

Borrower, Interest Owner or any guarantor voluntarily brings or acquiesces to any of the following:  (A) any action for dissolution, act of dissolution or dissolution or the like of Borrower, Interest Owner or any guarantor under the Federal Bankruptcy Code as now or hereafter constituted; (B) the filing of a petition or answer proposing the adjudication of Borrower, Interest Owner or any guarantor as a bankrupt or its reorganization or arrangement, or any composition, readjustment, liquidation, dissolution or similar relief with respect to it pursuant to any present or future federal or state bankruptcy or similar law; or (C) the appointment by order of a court of competent jurisdiction of a receiver, trustee or liquidator of the Premises or any part thereof or of Borrower, Interest Owner or any guarantor or of substantially all of the assets of Borrower, Interest Owner or any guarantor; or

(c)

one or more of the items set forth in paragraph 10(b) above occur which were either not (i) voluntarily brought by Borrower, Interest Owner or any guarantor or (ii) acquiesced in by Borrower, Interest Owner or any guarantor, and which are not discharged or dismissed within 90 days after the action, filing or appointment, as the case may be; or

With respect to the matters in (b) and (c) above for an Interest Owner only, no Event of Default shall occur until an interested party or Interest Owner asserts a claim or right against Borrower or the Premises which delays or otherwise affects Lender's rights, remedies, or interests granted under the Loan Documents (whether or not such assertion is successful).

(d)

with respect to the matters not described in the other subparagraphs of this paragraph 10, failure to duly observe or perform any covenant, condition or agreement of the Borrower or any guarantor contained in this Deed of Trust, the Guaranty, the Note or the Assignment of Leases from Borrower to Lender or in any other instrument or agreement which evidences or secures the Loan (the "Loan Documents"), but excluding the Environmental Indemnity or in the Environmental Indemnity, and such failure shall have continued for 30 days after Notice specifying such failure is given by Lender to Borrower; or

If any failure to observe or perform under (d) above shall be of such nature that it cannot be cured or remedied within 30 days, Borrower shall be entitled to a reasonable period of time to cure or remedy such failure (not to exceed 90 days following the giving of Notice), provided Borrower commences the cure or remedy thereof within the 30 day period following the giving of Notice and thereafter proceeds with diligence, as determined by Lender, to complete such cure or remedy.  

With respect to the matters in (d), no Event of Default shall occur if the failure to observe or perform will not have a Material Adverse Effect as such term is defined below.

"Material Adverse Effect" means a material adverse effect upon (i) the business or the financial position or results of operation of Borrower, (ii) the ability of Borrower to perform, or of Lender to enforce, any of the Loan Documents or Environmental Indemnity or (iii) the value of (x) the Collateral taken as a whole or (y) the Premises.

(e)

the failure of Borrower to duly observe or perform any of the covenants, conditions and agreements of the Borrower contained in paragraph 2(f) of this Deed of Trust and to cure such failure within ten (10) days following Borrower’s receipt of Notice of such failure; provided, however, that Borrower shall only be granted said 10 day cure period if the failure to observe or perform is a curable event and the granting of said cure period will not have a Material Adverse Effect; or

(f)

any representation when made by or on behalf of Borrower, Interest Owner or any guarantor regarding the Premises, the making or delivery of any of

the Loan Documents or the Environmental Indemnity or in any material written information provided by or on behalf of Borrower, Interest Owner or any guarantor in connection with the Loan shall prove to be untrue or inaccurate in any material respect; or

(g)

the failure of Borrower to give Notice to Lender within 90 days after the death of any individual who is personally liable for any obligation under the Loan Documents or the Environmental Indemnity, as Borrower, indemnitor or guarantor, whether or not such individual had executed the Note or this Deed of Trust; or

(h)

subject to the provisions of paragraph 2(f), the failure of Borrower to provide Lender with an assumption agreement in form and substance and executed by a person(s) or entity(ies) acceptable to Lender in its sole discretion to assume the obligations of any deceased individual who is personally liable for any obligation under the Loan Documents or the Environmental Indemnity, as Borrower, indemnitor or guarantor, whether or not such individual had executed the Note or this Deed of Trust, and such failure shall have continued for 90 days after the death of such individual;

(i)

all or any portion of the Premises is operated as or converted to a cooperative or condominium form of ownership; or

then, in each and every such case, the whole of said principal sum hereby secured shall, at the option of the Lender and without further notice to Borrower, become immediately due and payable together with accrued interest thereon, a Make Whole Premium calculated in accordance with the provisions of the Loan Documents and all other Indebtedness, and whether or not Lender has exercised said option, interest shall accrue on the entire principal balance and any interest or Make Whole Premium or other Indebtedness then due, at the Default Rate until fully paid or if Lender has not exercised said option, for the duration of any Event of Default.  

11.

Borrower agrees that if Lender accelerates the whole or any part of the principal sum hereby secured after the occurrence of an Event of Default but outside of the Open Periods, that Borrower shall pay as yield maintenance protection and not as a penalty, a "Make Whole Premium", as defined in the Note.

12.

(a)

Upon the occurrence of any Event of Default, in addition to any other rights or remedies provided in the Loan Documents, at law, in equity or otherwise, Lender shall have the right to cause the Premises or any part thereof to be sold in order to accomplish the object of these trusts and

upon demand by Lender, Trustee, without demand on Borrower, shall sell the Premises or such part thereof as Trustee in its sole discretion may deem necessary to accomplish the objects of these trusts having first given notice of the time and place of such sale as required by law for the sale of real property upon execution.

(b)

Trustee may postpone such sale from time to time by giving notice of such postponement in the same manner in which any original notice of sale was given or by an announcement or proclamation made to the persons assembled at the time and place previously appointed and noticed for such sale or postponed sale, and on the date of such sale or the date to which such sale may have been postponed Trustee may sell the Premises to the highest bidder.  Lender or its agents may bid and purchase at such sale.  Trustee in conducting said sale may act either in person or through the agency of an auctioneer and may establish as one of the conditions of such sale that all bids and payments for said Premises be made in cash.

13.

Upon such sale, Trustee shall make, execute, and after due payment is made, deliver to the purchaser or purchasers a deed or deeds for the Premises or part thereof sold and shall apply the proceeds of the sale, at the election of Lender first, to all of the expenses of such sale including the reasonable expenses of this trust or the Trustee and the fees and costs of any attorneys for this trust, environmental audits, the Trustee or Lender, all of which shall accrue and become due from and after any Event of Default, together with any sums which Trustee or Lender shall have paid for procuring any abstract, certificate or report of title to the Premises and, second, to principal, interest and any other Indebtedness and all other sums or amounts due under the Note or agreed or provided to be paid by Borrower herein or in any other Loan Documents, all in such order as Lender may determine.  The remainder of such proceeds, if any, sha ll be paid to Borrower or Borrower's successors or assigns, as their rights may appear.  

14.

In the event of such a sale of the Premises or any part thereof and the execution of a deed or deeds therefor under these trusts, any recital therein of the occurrence of an Event of Default or of the giving or recording of any notice or demand by Trustee or Lender regarding such sale shall be conclusive proof thereof, and the receipt of the purchase money recited therein shall fully discharge the purchaser from any obligation for the proper application of the proceeds of sale in accordance with these trusts.

15.

Following the occurrence of an Event of Default, unless the same has been specifically waived in writing, Borrower shall forthwith upon demand of Trustee or Lender surrender to Lender possession of the Premises, and Lender shall be entitled to take actual possession of the Premises or any part thereof personally or by its agents or attorneys, and Lender in its discretion may, with or without force

and with or without process of law, enter upon and take and maintain possession of all or any part of the Premises together with all documents, books, records, papers and accounts of the Borrower or the then owner of the Premises relating thereto, and may exclude Borrower, its agents or assigns wholly therefrom, and may as attorney-in-fact or agent of the Borrower, or in its own name as Lender and under the powers herein granted:

(a)

hold, operate, maintain, repair, rebuild, replace, alter, improve, manage or control the Premises as it deems judicious, insure and reinsure the same and any risks related to Lender's possession, operation and management thereof and receive all Rents, either personally or by its agents, and with full power to use such measures, legal or equitable, as in its discretion it deems proper or necessary to enforce the payment or security of the Rents, including actions for the recovery of Rent, actions in forcible detainer and actions in distress for Rents, hereby granting full power and authority to exercise each and every of the rights, privileges and powers herein granted at any and all times hereafter, without notice to Borrower; and

(b)

conduct leasing activity pursuant to the provisions of the Assignment of Leases.

Neither Trustee nor Lender shall be obligated to perform or discharge, nor does either hereby undertake to perform or discharge, any obligation, duty or liability under any Lease.  Except to the extent that the same is caused solely by Lender's gross negligence or willful misconduct, should Trustee or Lender incur any liability, loss or damage under any Leases, or under or by reason of the Assignment of Leases, or in the defense of any claims or demands whatsoever which may be asserted against Lender or Trustee by reason of any alleged obligations or undertakings on its part to perform or discharge any of the terms, covenants or agreements in any Lease, the amount thereof, including costs, expenses and reasonable attorneys' fees and costs, including reasonable attorneys' fees and costs on appeal, shall be added to the Indebtedness and secured hereby.

16.

Upon the occurrence of an Event of Default, Trustee and Lender in the exercise of the rights and powers conferred upon them shall have the full power to use and apply the Rents, less costs and expenses of collection to the payment of or on account of the items listed in (a) - (c) below, at the election of Lender and in such order as Lender may determine as follows:

(a)

to the payment of (i) the expenses of operating and maintaining the Premises, including, but not limited to the cost of management, leasing (which shall include reasonable compensation to Trustee, Lender and their respective agent or agents if management and/or leasing is delegated to an agent or agents), repairing, rebuilding, replacing, altering and improving

the Premises, (ii) premiums on insurance as hereinabove authorized, (iii) taxes and special assessments now due or which may hereafter become due on the Premises, and (iv) expenses of placing the Premises in such condition as will, in the sole judgment of Lender, make it readily rentable;

(b)

to the payment of any principal, interest or any other Indebtedness secured hereby or any deficiency which may result from any foreclosure sale;

(c)

to the payment of established claims for damages, if any, reasonable attorneys' fees and costs and reasonable attorneys' fees and costs on appeal.

The manner of the application of Rents, the reasonableness of the costs and charges to which such Rents are applied and the item or items which shall be credited thereby shall be within the sole and unlimited discretion of Lender.  To the extent that the costs and expenses in (a) and (c) above exceed the amounts collected, the excess shall be added to the Indebtedness and secured hereby.

17.

Upon the occurrence of any Event of Default, unless the same has been specifically waived in writing, Lender may apply to any court having jurisdiction for the appointment of a receiver of the Premises.  Such appointment may be made either before or after sale, without notice, without regard to the solvency or insolvency of Borrower at the time of application for such receiver and without regard to the then value of the Premises or the adequacy of Lender's security.  Lender may be appointed as such receiver.  The receiver shall have power to collect the Rents during the pendency of any foreclosure proceedings and, in case of a sale, during the full statutory period of redemption, if any, as well as during any further times when Borrower, except for the intervention of such receiver, would be entitled to collect such Rents.  In addition, the receiver shall have all other powers which shall be necessary or are usual in such cases for the protection, possession, control, management and operation of the Premises during the whole of said period.  The court from time to time may authorize the receiver to apply the net income in its possession at Lender's election and in such order as Lender may determine in payment in full or in part of those items listed in paragraph 16.

18.

(a)

Borrower agrees that all reasonable costs, charges and expenses, including but not limited to, reasonable attorneys' fees and costs, incurred or expended by Trustee or Lender arising out of or in connection with any action, proceeding or hearing, legal, equitable or quasi-legal, including the preparation therefor and any appeal therefrom, in any way affecting or pertaining to the Loan Documents, the Environmental Indemnity, or the Premises, shall be promptly paid by Borrower.  All such sums not promptly paid by Borrower shall bear interest at the Default Rate from the date of such advance and shall be due and payable on demand and, except

for sums relating to the Environmental Indemnity, shall be added to the Indebtedness secured hereby.

(b)

Borrower hereby agrees that upon the occurrence of an Event of Default and the acceleration of the principal sum secured hereby pursuant to this Deed of Trust, to the full extent that such rights can be lawfully waived, Borrower hereby waives and agrees not to insist upon, plead, or in any manner take advantage of, any notice of acceleration, any stay, extension, exemption, homestead, marshaling or moratorium law or any law providing for the valuation or appraisement of all or any part of the Premises prior to any sale or sales thereof under any provision of this Deed of Trust or before or after any decree, judgment or order of any court or confirmation thereof, or claim or exercise any right to redeem all or any part of the Premises so sold and hereby expressly waives to the full extent permitted by applicable law on behalf of itself and each and every person or entity acquiring any right, title or interest in or to all or any part of the Premises, all benefit and advantage of any such laws which would otherwise be available to Borrower or any such person or entity, and agrees that neither Borrower nor any such person or entity will invoke or utilize any such law to otherwise hinder, delay or impede the exercise of any remedy granted or delegated to Lender herein but will permit the exercise of such remedy as though any such laws had not been enacted.  Borrower hereby further expressly waives to the full extent permitted by applicable law on behalf of itself and each and every person or entity acquiring any right, title or interest in or to all or any part of the Premises any and all rights of redemption from any sale or any order or decree of foreclosure obtained pursuant to provisions of this Deed of Trust.

19.

In accordance with and subject to the terms and conditions of the Assignment of Leases, Borrower hereby assigns to Lender directly and absolutely, and not merely collaterally, the interest of Borrower as lessor under the Leases of the Premises, and the Rents payable under any Lease and/or with respect to the use of the Premises, or portion thereof, including any oil, gas or mineral lease, or any installments of money payable pursuant to any agreement or any sale of the Premises or any part thereof, subject only to a license, if any, granted by Lender to Borrower with respect thereto prior to the occurrence of an Event of Default.  Borrower has executed and delivered the Assignment of Leases which grants to Lender specific rights and remedies in respect of said Leases and governs the collection of Rents thereunder and from the use of the Premises, and such rights and remedies so granted shall be cumulative of those granted herein.  

The collection of such Rents and the application thereof as aforesaid shall not cure or waive any Event of Default or notice of default hereunder or invalidate any act done pursuant to such notice, except to the extent any such Event of Default is

fully cured.  Failure or discontinuance of Lender at any time, or from time to time, to collect any such moneys shall not impair in any manner the subsequent enforcement by Lender of the right, power and authority herein conferred on Lender.  Nothing contained herein, including the exercise of any right, power or authority herein granted to Lender, shall be, or be construed to be, an affirmation by Lender of any tenancy, Lease or option, or right to possession otherwise, or an assumption of liability under, or the subordination of the lien or charge of this Deed of Trust to any such tenancy, Lease or option or right to possession otherwise.  Borrower hereby agrees that, in the event Lender exercises its rights as provided for in this paragraph or in the Assignment of Leases, Borrower waives any right to compensation for the use of Borrower's furniture, furnishings or equipment in the Premises for the period such assignm ent of rents or receivership is in effect, it being understood that the Rents derived from the use of any such items shall be applied to Borrower's obligations hereunder as above provided.  

20.

All rights and remedies granted to Trustee or Lender in the Loan Documents shall be in addition to and not in limitation of any rights and remedies to which it is entitled in equity, at law or by statute, and the invalidity of any right or remedy herein provided by reason of its conflict with applicable law or statute shall not affect any other valid right or remedy afforded to Trustee or Lender.  No waiver of any default or Event of Default under any of the Loan Documents shall at any time thereafter be held to be a waiver of any rights of the Trustee or Lender hereunder, nor shall any waiver of a prior Event of Default or default operate to waive any subsequent Event of Default or default.  All remedies provided for in the Loan Documents are cumulative and may, at the election of Lender, be exercised alternatively, successively or concurrently.  No act of Trustee or Lender shall be construed as an election to proceed under any one provision herein to the exclusion of any other provision or to proceed against one portion of the Premises to the exclusion of any other portion.  Time is of the essence under this Deed of Trust and the Loan Documents.

21.

By accepting payment of any sum secured hereby after its due date, Lender does not waive its right either to require prompt payment when due of all other sums or installments so secured or to declare a default for failure to pay such other sums or installments.

22.

The usury provisions of paragraph 6 of the Note and the liability provisions of paragraph 9 of the Note are fully incorporated herein by reference as if the same were specifically stated here.

23.

In the event one or more provisions of the Loan Documents shall be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision hereof, and the Loan

Documents shall be construed as if any such provision had never been contained herein.  

24.

If the payment of the Indebtedness secured hereby or of any part thereof shall be extended or varied, or if any part of the security be released, all persons now or at any time hereafter liable therefor, or interested in said Premises, shall be held to assent to such extension, variation or release, and their liability and the lien and all provisions hereof shall continue in full force, the right of recourse against all such persons being expressly reserved by Lender notwithstanding such variation or release.  

25.

Upon payment in full of the principal sum, interest and other Indebtedness secured by the Loan Documents, these presents shall be null and void, and Trustee shall release this Deed of Trust and the lien hereof by proper instrument executed in recordable form.  

26.

(a)

Borrower hereby grants to Lender and its respective agents, attorneys, employees, consultants, contractors and assigns an irrevocable license and authorization to enter upon and inspect the Premises and all facilities located thereon at reasonable times.

(b)

In connection with any sale or conveyance of this Deed of Trust, Borrower grants to Lender and its respective agents, attorneys, employees, consultants, contractors and assigns an irrevocable license and authorization to conduct, at Lender's expense, a Phase I environmental audit of the Premises.

(c)

In the event there has been an Event of Default or in the event Lender has formed a reasonable belief, based on its inspection of the Premises or other factors known to it, that Hazardous Materials may be present on the Premises, then Borrower grants to Lender and its respective agents, attorneys, employees, consultants, contractors and assigns an irrevocable license and authorization to conduct environmental tests of the Premises, including without limitation, a Phase I environmental audit, subsurface testing, soil and ground water testing, and other tests which may physically invade the Premises or facilities (the "Tests").  The scope of the Tests shall be such as Lender, in its sole but reasonable discretion, determines is necessary to (i) investigate the condition of the Premises, (ii) protect the security interests created under this Deed of Trust, or (iii) determine compliance with Environmental Laws, the provisions of the Loan Documents and the Environmental Indemnity and other matters relating thereto.  Borrower shall pay the reasonable costs of the Tests and upon Borrower’s request, Lender will make available to Borrower the result of the Tests.

(d)

Provided no Event of Default has occurred, Lender will provide Borrower with reasonable notice of Lender's intent to enter, inspect and conduct the Tests provided for in this paragraph.  In addition, Lender shall conduct such inspections and Tests during normal business hours and use reasonable efforts to minimize disruption of lessees' business operations.

The foregoing licenses and authorizations are intended to be a means of protection of Lender's security interest in the Premises and not as participation in the management of the Premises.

27.

Within 15 days after any written request by any party to this Deed of Trust, the requested party shall certify, by a written statement duly acknowledged, the amount of principal, interest and other Indebtedness then owing on the Note, the terms of payment, Maturity Date and the date to which interest has been paid.  Borrower shall further certify whether any defaults, offsets or defenses exist against the Indebtedness secured hereby.  

28.

(a)

Borrower shall furnish to Lender within 120 days after the end of each fiscal year of Borrower, a statement of income and expenses for Borrower’s operation of the Premises for that fiscal year, a statement of changes in financial position of Borrower relating to the Premises for that fiscal year and, when requested by Lender, a balance sheet showing all assets and liabilities of Borrower relating to the Premises as of the end of that fiscal year;

(b)

Borrower shall furnish to Lender within 120 days after the end of each fiscal year of Borrower, and at any other time upon Lender’s request, a rent schedule for the Premises showing the name of each tenant, and for each tenant, the space occupied, the lease expiration date, the rent payable for the current month, the date through which rent has been paid, and any related information requested by Lender;

(c)

Borrower shall furnish to Lender within 120 days after the end of each fiscal year of Borrower, and at any other time upon Lender’s request, an accounting of all security deposits held pursuant to all Leases, including the name of the institution (if any) and the names and identification numbers of the accounts (if any) in which such security deposits are held and the name of the person to contact at such financial institution, along with any authority or release necessary for Lender to access information regarding such accounts;

(d)

upon Lender’s request, a balance sheet, a statement of income and expenses for Borrower, a statement of changes in financial position of

Borrower for Borrower’s most recent fiscal year, an aged account receivables report and an annual budget; and

(e)

if required by Lender, a statement of income and expense for the Premises for the prior month or quarter.

(f)

Each of the statements, schedules and reports required by Section 28 shall be certified to be complete and accurate by an individual having authority to bind Borrower, and shall be in such form and contain such detail as Lender may reasonably required.  If an Event of Default has occurred and is continuing, Lender may require that the financial statements required by Sections 28(a), 28(b) and 28(c) be audited, but may not require that any other financial statements required by Section 28 be audited.  Certification of a statement by the chief financial officer of the entity that is the subject of the statement or, in the case of a partnership, the chief financial officer of the general partner, will be acceptable to Lender as certification by an individual having authority to bind Borrower.

29.

Each notice, consent, request, report or other communication under this Deed of Trust or any other Loan Document (each a "Notice") which any party hereto may desire or be required to give to the other shall be deemed to be an adequate and sufficient notice if given in writing and service is made by either (i) registered or certified mail, postage prepaid, in which case notice shall be deemed to have been received three (3) business days following deposit to U.S. mail; or (ii) nationally recognized overnight air courier, next day delivery, prepaid, in which case such notice shall be deemed to have been received one (1) business day following delivery to such nationally recognized overnight air courier.  All Notices shall be addressed to Borrower at its address given on the first page hereof, or to Lender at c/o Principal Real Estate Investors, LLC, 801 Grand Avenue, Des Moines, Iowa 50392-1450, Attn:  Commerc ial Real Estate Servicing, Loan No. 755505, or to such other place as any party may by written notice to the other parties hereafter designate as a place for service of notice.  Borrower shall not be permitted to designate more than one place for service of Notice concurrently.

30.

Lender, from time to time, may substitute another Trustee in place of the Trustee named herein, to execute the trusts hereby created; and upon such appointment, and without conveyance to the successor trustee, the successor trustee shall be vested with all the title, interest, powers, duties and trusts in the Premises hereby vested in or conferred upon Trustee herein named.  Each such appointment and substitution shall be made by written instrument executed by the Lender containing reference to this Deed of Trust sufficient to identify it, which instrument, when recorded in the office of the County Recorder of the county or counties in which the Premises is situated, shall be conclusive proof of proper appointment of the successor trustee.  The recital or statement, in any instrument

executed by Trustee in pursuance of any of said trusts, of the due authorization of any agent of the Trustee executing the same shall for all purposes be conclusive proof of such authorization.  

31.

Trustee at any time, at Trustee's option, may commence and maintain suit in any court of competent jurisdiction and obtain the aid and direction of said court in the execution by it of the trusts or any of them, herein expressed or contained, and, in such suit, may obtain the orders or decrees, interlocutory or final of said court directing the execution of said trusts, and confirming and approving Trustee's acts, or any of them, or any sales or conveyances made by Trustee, and adjudging the validity thereof, and directing that the purchasers of the property sold and conveyed be let into immediate possession thereof, and providing for orders of court or other process requiring the Sheriff of the county in which said property is situated to place and maintain said purchasers in quiet and peaceable possession of the property so purchased by them, and the whole thereof.  

32.

Borrower has had the opportunity to fully negotiate the terms hereof and modify the draftsmanship of the Loan Documents and the Environmental Indemnity.  Therefore, the terms of the Loan Documents and the Environmental Indemnity shall be construed and interpreted without any presumption, inference, or rule requiring construction or interpretation of any provision of the Loan Documents and the Environmental Indemnity against the interest of the party causing the Loan Documents and the Environmental Indemnity or any portion of it to be drafted.  Borrower is entering into the Loan Documents and the Environmental Indemnity freely and voluntarily without any duress, economic or otherwise.

33.

Borrower, forthwith upon request, at any and all times hereafter, at the expense of Borrower, will cause to be made, executed, acknowledged and delivered to Trustee, any and every deed or assurance in law which Trustee or counsel of Trustee shall reasonably advise or require for the more sure, effectual and satisfactory granting and confirming of said Premises unto Trustee.  

34.

Trustee shall not be liable or responsible for its acts or omissions hereunder, except for Trustee's own gross negligence or willful default, or be liable or responsible for any acts or omissions of any agent, attorneys or employee by him employed hereunder, if selected with reasonable care.  

35.

Trustee accepts this trust when this Deed of Trust executed and acknowledged is made a public record as provided by law.  Trustee is not obligated to notify any party hereto of pending sale under any other deed of trust or of any action or proceeding in which Borrower, Lender, or Trustee shall be a party unless brought by Trustee.  

36.

This Deed of Trust and all provisions hereof shall inure to the benefit of the heirs, successors and assigns of Lender and shall bind the heirs and permitted successors and assigns of Borrower.  

37.

This Deed of Trust shall be governed by, and construed in accordance with, the laws of the state of California, without regard to its conflicts of law principles.

38.

As used herein, the term "Default Rate" means a rate equal to the lesser of (i) four percent (4%) per annum above the then applicable interest rate payable under the Note or (ii) the maximum rate allowed by applicable law.

39.

BORROWER AND LENDER EACH KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE, TO THE EXTENT PERMITTED BY LAW, TRIAL BY JURY IN ANY ACTIONS BROUGHT BY BORROWER, TRUSTEE OR LENDER IN CONNECTION WITH THIS DEED OF TRUST, ANY OF THE LOAN DOCUMENTS, THE INDEBTEDNESS SECURED HEREBY, OR ANY OTHER STATEMENTS OR ACTIONS OF LENDER.

40.

This Deed of Trust and the Indebtedness secured hereby is for the sole purpose of conducting or acquiring a lawful business, professional or commercial activity or for the acquisition or management of real or personal property as a commercial investment, and all proceeds of such Indebtedness shall be used for said business or commercial investment purpose.  Such proceeds will not be used for the purchase of any security within the meaning of the Securities Exchange Act of 1934, as amended, or any regulation issued pursuant thereto, including without limitation, Regulations U, T and X of the Board of Governors of the Federal Reserve System.  This is not a purchase money deed of trust where a seller is providing financing to a buyer for the payment of all or any portion of the purchase price, and the Premises secured hereby is not a residence or homestead or used for mining, grazing, agricultural, timber or farming purposes.

41.

Unless Lender shall otherwise direct in writing, Borrower shall appear in and defend all actions or proceedings purporting to affect the security hereunder, or any right or power of the Lender.  The Lender shall have the right to appear in such actions or proceedings.  Borrower shall save Lender harmless from all reasonable costs and expenses, including but not limited to, reasonable attorneys' fees and costs, and costs of a title search, continuation of abstract and preparation of survey incurred by reason of any action, suit, proceeding, hearing, motion or application before any court or administrative body in and to which Lender may be or become a party by reason hereof.  Such proceedings shall include but not be limited to condemnation, bankruptcy, probate and administration proceedings, as well as any other action, suit, proceeding, right, motion or application wherein proof of claim is by law required to be filed or in which it becomes necessary to defend or uphold the terms of this Deed of Trust or the Loan Documents or

otherwise purporting to affect the security hereof or the rights or powers of Lender.  All money paid or expended by Lender in that regard, together with interest thereon from date of such payment at the applicable interest rate shall be additional Indebtedness secured hereby and shall be immediately due and payable by Borrower without notice.

42.

Upon the occurrence of an Event of Default, unless the same has been specifically waived in writing, all Rents collected or received by Borrower shall be accepted and held for Lender in trust and shall not be commingled with the funds and property of Borrower, but shall be promptly paid over to Lender.

43.

If more than one, all obligations and agreements of Borrower are joint and several.

44.

This Deed of Trust may be executed in counterparts, each of which shall be deemed an original; and such counterparts when taken together shall constitute but one agreement.

45.

Borrower shall pay Lender for every Lender statement furnished at Borrower's request the maximum fee allowed by law pursuant to Section 2943 of the Civil Code of California and all amendments thereto, the provisions of which are incorporated herein by reference and made a part hereof.  Such fee shall be computed as of the time said statement is furnished.

46.

Borrower hereby irrevocably authorizes Lender to apply any and all amounts received by Lender in repayment of amounts due under the Loan Documents first to amounts which are not guaranteed pursuant to the terms of any guaranty and then to amounts which are guaranteed pursuant to the terms of any guaranty.  Borrower hereby waives any and all rights it has or may have under Section 2822 of the California Civil Code which provides that if a guarantor is "liable upon only a portion of an obligation and the principal provides partial satisfaction of the obligation, the principal may designate the portion of the obligation that is to be satisfied."

47.

Notwithstanding anything to the contrary set forth herein or in any of the Loan Documents, this Deed of Trust shall not secure the following obligations (the "Unsecured Obligations"):  (i) any obligations evidenced by or arising under the Environmental Indemnity; and (ii) any other obligations in this Deed of Trust or in any of the other Loan Documents to the extent that such other obligations relate specifically to the presence on the Premises of Hazardous Materials and are the same or have the same effect as any of the obligations evidenced by or arising under the Environmental Indemnity (excluding the cost of any Tests incurred by Lender hereunder).  Any breach or default with respect to the Unsecured Obligations after the expiration of any applicable cure periods shall constitute an

Event of Default hereunder, notwithstanding the fact that such Unsecured Obligations are not secured by this Deed of Trust.

48.

Borrower desires and intends that this Deed of Trust also constitute a fixture filing between Borrower as debtor and Lender as secured party, as defined in the Uniform Commercial Code.  To this end, Borrower acknowledges that (i) this Deed of Trust covers goods which are or are to become fixtures on the Land; (ii) this financing statement is to be recorded; (iii) Borrower is the record owner of such property; and (iv) products of collateral are also covered.  No financing statement in favor of any secured party other than Lender covering the personal property described herein or any portion thereof is on file in any public office.

(Signatures on next page)

IN WITNESS WHEREOF, Borrower has caused this Deed of Trust to be duly executed and delivered as of the date first above written.   

VMS NATIONAL PROPERTIES, an Illinois general partnership

By:

VMS NATIONAL RESIDENTIAL PORTFOLIO I, an Illinois limited partnership

By:

MAERIL, INC., a Delaware

                        corporation, its general partner

       By: /s/Patti K. Fielding

       Name:  Patti K. Fielding

                Title:  Executive Vice President  

                           and Treasurer

By:

VMS NATIONAL RESIDENTIAL PORTFOLIO II, an Illinois limited partnership

By:

MAERIL, INC., a Delaware

                        corporation, its general partner

       By: /s/Patti K. Fielding

       Name:  Patti K. Fielding

                Title:  Executive Vice President  

                           and Treasurer

EX-10

Exhibit 10.13

GUARANTY

755505

THIS GUARANTY (as the same may from time to time hereafter be modified, supplemented or amended, the "Guaranty") is made as of January 19, 2007, by AIMCO PROPERTIES, L.P., a Delaware limited partnership, having an office at Stanford Place 3, 4582 South Ulster Street Parkway, Suite 1100, Denver, Colorado 80237 ("Guarantor"), in favor of PRINCIPAL LIFE INSURANCE COMPANY, an Iowa corporation ("Lender").

RECITALS:

Lender has agreed to make a loan (the "Loan") in the original principal sum of Twenty Three Million Three Hundred Thousand and 00/100 Dollars ($23,300,000.00) (the "Loan Amount") to VMS NATIONAL PROPERTIES, an Illinois general partnership ("Borrower"); and

The Loan is evidenced by Borrower's secured promissory note made payable and delivered to Lender (as the same may from time to time hereafter be modified, amended, supplemented, extended or consolidated in writing, and any note(s) issued in exchange therefor or replacement thereof, the "Note") and further evidenced and secured by a "Mortgage" (it being agreed that "Mortgage" as hereinafter used shall be construed to mean "mortgage" or "deed of trust" or "trust deed" or "deed to secure debt" as the context so requires) on certain real estate located in Los Angeles County, California, together with all existing improvements constructed thereon, said Premises being more particularly described in said Mortgage, and an Assignment of Leases ("Assignment of Leases"); and

In connection with the Loan, the Borrower has also executed that certain Environmental Indemnity ("Environmental Indemnity") for the benefit of Lender (the Note, Environmental Indemnity, Mortgage and Assignment of Leases and all other instruments or agreements by which the Loan is evidenced or secured are hereinafter collectively referred to as the "Underlying Instruments"); and

It is a condition of Lender's agreement to make the Loan that Guarantor be unconditionally liable for and personally guarantee the payment and performance of certain liabilities and obligations of the Borrower under the Underlying Instruments upon the terms and conditions as are hereinafter set forth and except for such liabilities and obligations described herein, Guarantor shall have no liability in connection with, or responsibility to perform, under or in accordance with the Underlying Instruments; and

WHEREAS, Guarantor is financially interested in Borrower and is materially benefited by the consummation of the Loan and has agreed to unconditionally and personally guarantee the payment and performance of certain liabilities and obligations of Borrower under the Underlying Instruments upon the terms and conditions as are hereinafter set forth.

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NOW, THEREFORE, in order to induce Lender to make the Loan to Borrower, Guarantor intending to be legally bound, hereby makes the following representations and warranties to the Lender and hereby covenants and agrees with the Lender as follows:

1.

Guarantor absolutely, irrevocably and unconditionally guarantees to the Lender payment and the full, faithful and timely performance of any and all liabilities and obligations of Borrower whether now existing or hereafter incurred under the Environmental Indemnity and paragraph 9 of the Note (all of which payments, liabilities and obligations are hereinafter collectively referred to as the "Guaranteed Obligations").

2.

Guarantor absolutely, irrevocably and unconditionally waives notice of acceptance of this Guaranty and notice of any payment, liability or obligation to which it may apply, and waives presentment, demand of payment, protest, notice of dishonor or nonpayment of such liabilities under this Guaranty or any of the Underlying Instruments creating the Guaranteed Obligations and any suit or taking other action by the Lender against, and any other notice to, any party liable thereon or any property which may be security therefor.

3.

The Lender may at any time and from time to time without the consent of, or notice to, Guarantor, without incurring any responsibility to Guarantor and without impairing or releasing any of the obligations of Guarantor hereunder, upon or without any terms or conditions and in whole or in part:

(a)

renew, alter or change the interest rate, manner, time, place or terms of payment or performance of any of the Guaranteed Obligations, or any liability incurred directly or indirectly in respect thereof, whereupon the guaranty herein made shall apply to the Guaranteed Obligations as so changed, extended, renewed or altered;

(b)

sell, exchange, release, surrender, and in any manner and in any order realize upon or otherwise deal with any property at any time directly and absolutely assigned or pledged or mortgaged to secure the Guaranteed Obligations or any liabilities (including any of those hereunder) incurred directly or indirectly in respect thereof;

(c)

exercise or refrain from exercising any rights against Borrower or any other person (including Guarantor) or otherwise act or refrain from acting with regard to the Underlying Instruments, Guaranteed Obligations or this Guaranty;

(d)

settle or compromise any of the Guaranteed Obligations, any security therefor or any liability (including any of those hereunder) incurred directly or indirectly in respect thereof or hereof, and/or subordinate the payment of all or any part thereof to the payment of any liability of Borrower (whether or not then due) to creditors of Borrower other than the Lender and Guarantor;

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(e)

apply any sums in whatever manner paid or realized to any liability or liabilities of Borrower to the Lender regardless of what liability or liabilities of Borrower remain unpaid;

(f)

consent to or waive any breach of or any act, omission or default under the Underlying Instruments or otherwise amend, modify or supplement any of such instruments or agreements; and/or

(g)

sell, convey or assign, whether into a securitized transaction or otherwise, all or any part of Lender's interest in this Guaranty and the Underlying Instruments.

4.

(a)

No invalidity, irregularity or unenforceability of all or any part of the Underlying Instruments, the Guaranteed Obligations or this Guaranty, or of any security therefor, shall affect, impair or constitute a defense to this Guaranty.  This Guaranty is a direct and primary obligation of Guarantor, and Guarantor's obligations hereunder are not as a surety.  This is a guaranty of payment and performance, and not merely a guaranty of collection.

(b)

Guarantor acknowledges and agrees that this Guaranty and Guarantor's obligations with respect to payments and performance under the Environmental Indemnity shall remain in full force and effect, notwithstanding the fact that the Note and payments due under the other Underlying Instruments have been paid in full.  The Guarantor’s obligations with respect to payments and performance under paragraph 9 of the Note shall remain in full force and effect until the liabilities and obligations of Borrower under paragraph 9 of the Note have been paid and performed in full.

5.

(a)

Notwithstanding any payment or payments made by Guarantor hereunder, Guarantor will not assert or exercise any right of the Lender or of such Guarantor against Borrower to recover the amount of any payment made by such Guarantor to the Lender by way of subrogation, reimbursement, contribution, indemnity or otherwise arising by contract or operation of law, and Guarantor shall not have any right of recourse to or any claim against assets or property of Borrower, whether or not the obligations of Borrower have been satisfied, all of such rights being herein expressly waived by Guarantor.  The provisions of this paragraph shall survive the termination of this Guaranty, and any satisfaction and discharge of Borrower by virtue of any payment, court order or any applicable law.

(b)

Notwithstanding the provisions of Section 5(a), Guarantor shall have and be entitled to all rights of subrogation otherwise provided by applicable law in respect of any payment Guarantor may make or be obligated to make under this Guaranty, and to assert and enforce the same, in each case on and after, but at no

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time prior to, the date (the "Subrogation Trigger Date") which is 91 days after the date on which all obligations under the Underlying Instruments shall have been paid or performed in full, if and only if the existence of Guarantor's rights under this Section 5(b) would not make Guarantor a creditor (as defined in the Bankruptcy Reform Act of 1978, an amended, 11 U.S.C. Sections 101 et seq., and the regulations adopted and promulgated pursuant thereto) of Borrower in any insolvency bankruptcy, reorganization or similar proceeding commenced on or prior to the Subrogation Trigger Date.

(c)

In the event that Guarantor shall advance or become obligated to pay any sums with respect to any obligation hereby guaranteed or in the event that for any reason whatsoever the Borrower or any subsequent owner of the collateral securing the Loan is now, or shall hereafter become, indebted to Guarantor, Guarantor agrees that the amount of such sums and of such Indebtedness together with all interest thereon, shall at all times be subordinate as to the lien, time of payment and in all other respects, to all sums, including principal, interest and other Indebtedness, at any time owing to the Lender under any of the Underlying Instruments.  Nothing herein contained is intended or shall be construed to give to Guarantor any right to participate in any way in the right, title or interest of the Lender in or to the collateral securing the Loan, notwithstanding any payments made by Guarantor under this Guaranty, all such rights of parti cipation being hereby expressly waived and released.

(d)

Guarantor waives all rights and defenses arising out of an election of remedies by the creditor, even though that election of remedies, such as a nonjudicial foreclosure with respect to security for a guaranteed obligation, has destroyed the guarantor's rights of subrogation and reimbursement against the principal by the operation of Section 580d of the Code of Civil Procedure or otherwise.

(e)

Guarantor waives any rights Guarantor might have pursuant to the terms of Sections of the California Civil Code or Code of Civil Procedure including without limitation the following: (i) Guarantor waives the benefit of any statute of limitations affecting Guarantor's liability hereunder or the enforcement thereof, including, without limitation all rights and benefits, if any, arising under Section 359.5 of the California Code of Civil Procedure; (ii) Guarantor hereby waives, to the fullest extent permitted by law, all rights and benefits under Section 2809 of the California Civil Code purporting to reduce a guarantor's obligations in proportion to the principal obligation, all rights and benefits under Section 580a of the California Code of Civil Procedure purporting to limit the amount of any deficiency judgment which might be recoverable following the occurrence of a trustee's sale under the Deed of Trust, all rights and benefits un der Section 580b of the California Code of Civil Procedure stating that no deficiency may be recovered on a real property purchase money obligation and all rights and benefits

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under Section 580d of the California Code of Civil Procedure stating that no deficiency may be recovered on a note secured by a deed of trust on real property in case such real property is sold under the power of sale contained in such deed of trust, to the extent any such sections have any application hereto or any application to Guarantor; (iii) Guarantor waives all rights and defenses that the Guarantor may have because the Borrower's debt is secured by real property.  This means, among other things:  (1) Lender may collect from the Guarantor without first foreclosing on any real or personal property collateral pledged by the Borrower, (2) if Lender forecloses on any real property collateral pledged by the Borrower:  (A) the amount of debt may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than th e sale price, (B) Lender may collect from the Guarantor even if Lender, by foreclosing on the real property collateral, has destroyed any right the Guarantor may have to collect from Borrower.  This is an unconditional and irrevocable waiver of any rights and defenses the Guarantor may have because Borrower's debt is secured by real property.  These rights and defenses include, but are not limited to, any rights or defenses based upon Section 580a, 580b, 580d, or 726 of the Code of Civil Procedure; (iv) without limiting the generality of the foregoing or any other provision hereof, the Guarantor waives all rights and benefits which might otherwise be available to the Guarantor under Division Third, Part 4, Title XII of the California Civil Code.

6.

Guarantor agrees that to the extent that Borrower makes a payment or payments to Lender, which payment or payments or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required, for any of the foregoing reasons or for any other reasons, to be repaid or paid over to a custodian, trustee, receiver or any other party under any bankruptcy act, state or federal law, common law or equitable cause, then to the extent of such payment or repayment, the obligation or part thereof intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made.

7.

Guarantor makes the following representations and warranties which shall survive the execution and delivery of this Guaranty:

(a)

Guarantor is and, until the Indebtedness is paid in full, will continue to (i) be a duly organized and validly existing entity in good standing under the laws of the state of its formation, (ii) be duly qualified as a foreign entity in each jurisdiction in which the nature of its business makes such qualification necessary or desirable, (iii) have the requisite power and authority to carry on its business as now being conducted, (iv) have the requisite power to execute, deliver and perform its obligations under this Guaranty, and (v) comply with the provisions of all of its organizational documents, and the Legal Requirements of the state of its formation.

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(b)

The execution, delivery and performance of this Guaranty (i) are within the applicable powers of Guarantor; (ii) have been authorized by all requisite action; (iii) have received all necessary approvals and consents, corporate, governmental or otherwise; (iv) does not and will not violate, conflict with, result in a breach of or constitute (with notice or lapse of time, or both) a default under any provision of law, any order or judgment of any court or governmental authority, the articles of incorporation, by-laws, partnership, operating or trust agreement, or other governing instrument of Guarantor, or any indenture, agreement or other instrument to which Guarantor is a party or by which Guarantor or any of Guarantor's assets is or may be bound or affected; (v) does not and will not result in the creation or imposition of any lien, charge or encumbrance whatsoever upon any of Guarantor's assets; and (vi) does not and will not requir e any authorization or license from, or any filing with, any governmental authority or other body.

(c)

This Guaranty constitutes the legal, valid and binding obligations of Guarantor, enforceable against Guarantor in accordance with its terms, except as may be limited by (i) bankruptcy, insolvency, reorganization or other similar laws affecting the rights of creditors generally, and (ii) general principles of equity (regardless of whether considered in a proceeding in equity or at law).

8.

Guarantor and Borrower are separate and distinct entities with no identity of interest with respect to any Indebtedness which may become owed or any payments which may be made hereunder.  Borrower is not contractually bound to Guarantor with respect to any payments hereafter made under this Guaranty in any manner which would have the effect of imputing the liability of Guarantor hereunder to Borrower.

9.

Guarantor is related and/or affiliated with Borrower, has personal knowledge of and is familiar with Borrower's business affairs, books and records and has the ability to influence Borrower's financial decisions.  Guarantor represents that Borrower is in sound financial condition as of the date of this Guaranty.

10.

Nothing herein contained shall in any manner affect the lien or priority of the Mortgage, and upon the occurrence of an Event of a Default, the Lender may invoke any remedies it may have under the Underlying Instruments, or this Guaranty, either concurrently or successively and the exercise of any one or more of such remedies shall not be deemed an exhaustion of such remedy or remedies or a waiver of any other remedy or remedies and shall not be deemed an election of remedies.  Guarantor hereby specifically waives any defense to its performance under this Guaranty based upon an election of remedies by Lender, including but not limited to an election to foreclose by nonjudicial sale under any deed of trust or security agreement and pursue any other remedy which destroys, lessens or otherwise affects Guarantor's subrogation rights and/or its rights to reimbursement from or to proceed against Borrower or any other person, when resul ting from the judicial

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or nonjudicial foreclosure (under any deed of trust or security agreement) or the selling or otherwise disposing of or collecting or applying any property, real or personal, securing the Note, or otherwise.  The exercise by the Lender of any such remedies shall not release or discharge Guarantor from its obligations hereunder unless and until the full amount of the Indebtedness evidenced by the Note and secured as aforesaid has been fully paid and satisfied, and any such release or discharge shall be subject to the provisions of paragraph 4(b) hereof.

11.

This Guaranty shall remain in full force and effect until all obligations of the Borrower under the Underlying Instruments have been satisfied in full and are no longer subject to disgorgement under any applicable state or federal creditor rights or bankruptcy laws.  No delay on the part of the Lender in exercising any options, powers or rights, or the partial or single exercise thereof, shall constitute a waiver thereof.  No waiver of any rights hereunder, and no modification or amendment of this Guaranty, shall be deemed to be made by either party unless the same shall be in writing, duly signed on behalf of such party, and each such waiver (if any) shall apply only with respect to the specific instance involved and shall in no way impair the rights of such party or the obligations of Guarantor to the Lender in any other respect at any other time.  This Guaranty and the rights and obligations of the Lender and of Guar antor hereunder shall be governed and construed in accordance with the laws of the state of California, without regard to its conflicts of law principles and this Guaranty is binding upon Guarantor, Guarantor's heirs, personal representatives and permitted successors or assigns, and shall inure to the benefit of the Lender and its successors or assigns.

12.

Guarantor acknowledges that copies of the Underlying Instruments have been made available to Guarantor and that Guarantor is familiar with their contents.  Guarantor affirmatively agrees that upon any Permitted Transfer effected in accordance with the provisions of the Underlying Instruments or any transfer by Lender of all or any portion of its interest in the Loan, it shall not be necessary for Guarantor to reaffirm its continuing obligations under this Guaranty, but Guarantor will do so upon request by Lender.

13.

GUARANTOR AND LENDER EACH KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE, TO THE EXTENT PERMITTED BY LAW, TRIAL BY JURY IN ANY ACTIONS BROUGHT BY GUARANTOR OR LENDER IN CONNECTION WITH THIS GUARANTY, ANY OF THE LOAN DOCUMENTS, THE INDEBTEDNESS SECURED HEREBY, OR ANY OTHER STATEMENTS OR ACTIONS OF LENDER.

14.

Each notice, consent, request or other communication under this Guaranty (each a "Notice") which any party hereto may desire or be required to give to the other shall be deemed to be adequate and sufficient notice if given in writing and service is made by either (i) registered or certified mail, postage prepaid, in which case such notice shall be deemed to have been received three (3) business days following deposit to U.S. mail; or

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(ii) nationally recognized overnight air courier, next day delivery, prepaid, in which case such notice shall be deemed to have been received one (1) business day following delivery to such nationally recognized overnight air courier.  All Notices shall be addressed to Guarantor at its address given on the first page hereof, or to Lender at c/o Principal Real Estate Investors, LLC, 801 Grand Avenue, Des Moines, Iowa 50392-1450, Attn: Commercial Real Estate Servicing, Loan No. 755505, or to such other place as any party may by notice in writing to the other parties designate as a place for service of notice.

15.

Each Guarantor (if more than one) whose signature appears below shall be deemed to be bound by the provisions of this Guaranty and the Guaranteed Obligations, whether each signature was affixed at the same or different times, and the term "Guarantor" as used herein shall be deemed to refer to each individually, as well as collectively, and each of the undersigned shall be jointly and severally liable for the Guaranteed Obligations hereunder, both personally and with recourse, irrespective of the recourse or non-recourse nature of the Underlying Instruments.  Guarantor agrees that if this Guaranty is placed in the hands of an attorney for enforcement, Guarantor will reimburse Lender all expenses incurred, including attorney's fees.

16.

This Guaranty may be executed in counterparts, each of which shall be deemed an original; and such counterparts when taken together shall constitute but one agreement.

17.

Capitalized terms used herein and not otherwise defined shall have the meanings given to them in the Underlying Instruments.

18.

Guarantor hereby irrevocably authorizes Lender to apply any and all amounts received by Lender in repayment of the Loan first to amounts which are not guaranteed pursuant to the terms of any guaranty and then to amounts which are guaranteed pursuant to the terms of any guaranty.  Guarantor hereby waives any and all rights it has or may have under Section 2822 of the California Civil Code which provides that if a guarantor is "liable upon only a portion of an obligation and the principal provides partial satisfaction of the obligation, the principal may designate the portion of the obligation that is to be satisfied."

19.

In the case of a power of sale foreclosure under the Mortgage, the fair market value of the real property collateral shall be conclusively deemed to be the amount of the successful bid at the foreclosure sale.  Guarantor waives any rights or benefits it may now or hereafter have to a fair value hearing under Section 580a of the California Code of Civil Procedure.  Lender shall have absolutely no obligation to make a bid at any foreclosure sale, but rather may make no bid or bid any amount which Lender, in its sole discretion, deems appropriate.

(Signatures on next page)

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IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be duly executed and delivered as of the date first set forth above.

GUARANTOR:

AIMCO PROPERTIES, L.P., a Delaware limited partnership

By:      AIMCO-GP, Inc., a Delaware   

            corporation, its general partner

                  By: /s/Patti K. Fielding

       Name:  Patti K. Fielding

       Title:  Executive Vice President  

                              and Treasurer

EX-10

Exhibit 10.14

PROPERTY RESERVES AGREEMENT

755505

THIS PROPERTY RESERVES AGREEMENT (as the same may from time to time hereafter be modified, supplemented or amended, this "Agreement") is made as of January 19, 2007 by VMS NATIONAL PROPERTIES, an Illinois general partnership ("Borrower"), and PRINCIPAL LIFE INSURANCE COMPANY, an Iowa corporation ("Lender").

RECITALS

Lender has agreed to make a loan (the "Loan") in the original principal amount of Twenty-three  Million Three Hundred Thousand and 00/100 Dollars ($23,300,000.00) (the "Loan Amount") to Borrower as set forth in the Loan Documents, executed by and between Lender and Borrower; and

The Loan is evidenced by Borrower's Secured Promissory Note made payable and delivered to Lender (as may be modified, amended, supplemented, extended or consolidated in writing, and any note(s) issued in exchange therefor or in replacement thereof, the "Note") and further evidenced and secured by, among other things, a "Mortgage" (it being agreed that Mortgage as hereinafter used shall be construed to mean "mortgage" or "deed of trust" or "trust deed" or "deed to secure debt" as the context so requires) on certain real estate, together with all existing improvements constructed thereon, said Premises being more particularly described in said Mortgage.

NOW THEREFORE, in consideration of the making of the Loan, the mutual promises and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Lender and Borrower, intending to be legally bound, agree as follows:

1.

Property Reserves.

Borrower has agreed to deposit with Lender a letter of credit(s) (if more than one, collectively if the context so requires the "Letter of Credit") as detailed below to be held by Lender to reimburse Borrower for the costs of certain capital improvements to the Premises as described in Schedule 1 hereto and such other capital improvements to the Premises that Lender determines, in its sole discretion, provide a material benefit/improvement to the Premises upon completion thereof  (i.e. roof replacement/repair, new decks, rehabilitation of individual units) ("Capital Improvements").  The Letter of Credit and any renewal or replacement thereof and any proceeds therefrom shall be held by Lender as additional security for the Loan and are hereafter referred to as the "Property Reserves".  The term "Escrow Release" as used herein shall refer to a disb ursement of funds and/or a reduction of a Letter of Credit as applicable.

a.

On the Closing Date, Borrower shall deliver an acceptable Letter of Credit in the amount of $855,624.00 to cover the cost of Capital Improvements.

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2.

Borrower shall deliver to Lender not later than 30 days prior to the expiration date of any Letter of Credit and any renewal or replacement Letter of Credit, a renewal or replacement unconditional, irrevocable bank Letter of Credit identical in terms and amount and issued by a United States bank acceptable to Lender.  If Borrower shall fail to deliver any renewal or replacement Letter of Credit in accordance with the foregoing requirements, Lender may, in its discretion, draw upon any Letter of Credit then in its possession and hold such proceeds in accordance with the terms hereof.

Lender reserves the right to periodically review the financial condition of the issuing bank for any Letter of Credit and any renewal or replacement Letter of Credit and if Lender determines that the issuing bank no longer satisfies the criteria set forth above, Lender may require a replacement Letter of Credit in form and substance and from a United States bank acceptable to Lender.

3.

Standard Disbursement Requirements.  The following shall be defined as "Standard Disbursement Requirements":

(i)

copies of unconditional lien waivers for work completed which is the subject of the Escrow Release request;

(ii)

a title search in form and substance reasonably acceptable to Lender and if such search discloses conditions unacceptable to Lender or Lender deems it reasonably necessary, then such endorsements or other assurances reasonably satisfactory to Lender from the title insurance company insuring the continued first lien priority of the Mortgage;

(iii)

to the extent Lender deems reasonably necessary and to the extent that same are available and appropriate for the work which is the subject of the Escrow Release request, any or all of the following at Lender's discretion:  (A) all permits, bonds, licenses and approvals, whether necessary for commencement, performance, completion, occupancy, use or otherwise required by any applicable laws for the stage of work so completed; (B) a copy of the construction contract and any change orders and addenda thereto; (C) a statement from an architect, contractor or engineering consultant, in Lender's reasonable discretion, as to the extent and cost of the work so completed; and/or (D) other evidence as reasonably determined by Lender showing that Borrower has completed and performed the portion of the work which is the subject of the Escrow Release request; and

(iv)

Lender having inspected, or having expressly waived in writing such inspection, and approved the completed portion of the work which is the subject of the Escrow Release request.  Lender shall not require said inspection more than once per calendar year.

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4.

Capital Improvements.

a.

Except as hereinafter provided and so long as no Event of Default has occurred and is continuing under the Loan Documents, Lender shall allow Escrow Release(s) in the amounts hereinafter specified in accordance with the following terms and conditions:

(i)

Escrow Release(s) shall be for an amount equal to the actual costs and expenses incurred by Borrower in completing any Capital Improvements;

(ii)

Borrower shall submit written Escrow Release requests to Lender for Capital Improvements no more than once per calendar month and each such request shall be for an aggregate amount of not less than $25,000 (excluding the final disbursement); and

(iii)

Escrow Release(s) shall be conditioned upon Borrower furnishing to Lender with its written request, at Lender's discretion, the Standard Disbursement Requirements.

5.

Interest on Property Reserves.  Provided no Event of Default has occurred under any of the Loan Documents, Lender agrees to credit Borrower with interest earnings on the cash portion of the Property Reserves, (excluding however any cash proceeds resulting from Lender having drawn on any Letter of Credit or any renewal or replacement thereof); provided, however, that interest shall cease to be credited on any portion of the Property Reserves at such time as they have been disbursed to Borrower or otherwise applied in any manner provided in this Agreement or in the other Loan Documents.  Interest shall be credited on the average balance of the cash portion of the Property Reserves for the preceding calendar month or any portion of such preceding calendar month on or before the tenth (10^th) day of each calendar month at a rate equal to the thirty-day average of the daily 30-day Dealer Commercial Paper Rate as p ublished in the Wall Street Journal or similar financial publication, less 200 basis points.  Interest shall be disbursed to Borrower at such time and in the same manner as provided for disbursement of Property Reserves.

6.

Administration/Inspection Fee.  Lender shall be entitled to charge Borrower a reasonable processing fee for administering and reviewing an Escrow Release, not to exceed $500.00.  Lender shall also be entitled to charge Borrower reasonable processing fees both for reviewing any renewal or replacement Letter of Credit which Borrower is required to provide as well as for drawing upon any Letter of Credit held pursuant to the terms hereof (the processing fee for reviewing any renewal or replacement Letter of Credit shall not exceed $250.00).  Borrower shall be responsible for payment of all costs, fees and charges in connection with any reduction, renewal or replacement of the Letter of Credit which are assessed by the issuing bank.  

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Additionally, Lender shall be entitled to charge Borrower for any reasonable costs incurred by Lender in inspecting the Premises, not to exceed $750.00.

7.

Security Agreement.  This Agreement and the escrow of the Property Reserves under the terms hereof are intended to create a prior perfected security interest in the Property Reserves.  As more fully described in the Loan Documents, Borrower has assigned, conveyed, pledged and transferred to Lender and granted to Lender a first and continuing lien on and security interest in and to, among other things, all of Borrower's right, title and interest in and to the Property Reserves, which secure the full and punctual payment and performance of all of the Indebtedness.  Nothing contained herein shall cause Lender to be deemed a trustee of any Letter of Credit, any renewal thereof or any proceeds therefrom.  The Property Reserves shall not constitute any deposit or account of the Borrower or monies to which the Borrower is entitled upon demand, or upon the mere passage of time.  Lender shall not be required to s egregate the Property Reserves or hold them in any separate account for the benefit of the Borrower.  Upon the payment in full of all sums due to Lender under the Loan Documents, Lender shall promptly deliver the then existing Property Reserves to Borrower.

8.

Event of Default.  Upon the occurrence of an Event of Default under any of the Loan Documents, Lender may, with respect to the Property Reserves, or any portion thereof, exercise all enforcement rights and remedies granted to Lender under the Loan Documents and in addition to all other rights and remedies granted to Lender under the Loan Documents, Lender may, at its option, use such funds partially or in full (including any portion or all of the proceeds resulting from drawing on any Letter of Credit), in such order and preference as Lender may determine, to (1) cure or partially cure any Event of Default; (2) complete the work which is the subject of this Agreement; (3) pay any interest accrued under the terms of the Note; (4) pay any other Indebtedness; (5) pay the Make Whole Premium, if any, due and payable; (6) prepay the principal amount of the Loan or any part thereof; or (7) hold such funds in a non-interest bearing account as additional security for the Loan.  In the event the Property Reserves or any portion thereof are applied to prepay the principal amount of the Loan or any part thereof, Borrower waives any right to prepay the principal amount in whole or in part without premium, and agrees to pay, as liquidated damages and not as a penalty, a Make Whole Premium on any principal amount prepaid.  Notwithstanding anything contained herein to the contrary, nothing shall be construed to (a) make Lender responsible for performing or completing the work which is the subject of this Agreement, (b) require Lender to expend sums to complete the work which is the subject of this Agreement which are in excess of such amounts then allocated by Lender for such items, or (c) obligate Lender to demand from Borrower additional sums to complete the work which is the subject of this Agreement.

9.

Cost Overruns.  In the event that the costs and expenses incurred by Borrower in completing any work which is the subject of this Agreement exceed the respective amounts allocated by Lender for such items of expense, Borrower shall be responsible for the payment (from sources other than the Property Reserves) of such excess costs and expenses.

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10.

Notices.  All notices required to be sent hereunder shall be deemed to be an adequate and sufficient notice if given in accordance with the notice provisions of the Mortgage.

11.

Governing Law.  This Agreement shall be governed, construed, and enforced in accordance with the laws of the state in which the Premises is located, without regard to its conflicts of law principles.

12.

Headings.  The headings used herein are for convenience only and are not to be used in interpreting this Agreement.  Capitalized terms used herein and not otherwise defined shall have those meanings given to them in the Loan Documents.  Notwithstanding anything herein to the contrary, the terms and provisions of this Agreement as to Escrow Release(s) shall control over any provisions in the other Loan Documents to the contrary.

13.

Amendments.  This Agreement, and any provisions hereof, may not be modified, amended, waived, extended, changed, discharged or terminated orally or by any act or failure to act on the part of Borrower or Lender, but only by an agreement in writing signed by the parties hereto.

14.

Counterparts.  This Agreement may be executed in counterparts, each of which shall be deemed an original; and such counterparts when taken together shall constitute but one agreement.

15.

Inapplicable Provisions.  If any term, covenant or condition of this Agreement is held to be invalid, illegal or unenforceable in any respect, this Agreement shall be construed without such provision.

16.

Successors and Assigns.  This Agreement and all the provisions hereof shall inure to the benefit of the heirs, successors and assigns of Lender and shall bind the heirs, representatives, and permitted successors and assigns of Borrower.

(Signatures on next page)

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IN WITNESS WHEREOF, Borrower and Lender have hereunto caused this Agreement to be executed the date first above written.

LENDER:

PRINCIPAL LIFE INSURANCE COMPANY, an Iowa corporation

By:

PRINCIPAL REAL ESTATE INVESTORS, LLC, a Delaware limited liability company, its authorized signatory

By

__________________________

Name:

Title:

By

__________________________

Name:

Title:

(Signatures continued on following page)

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BORROWER:

VMS NATIONAL PROPERTIES, an Illinois general partnership

By:

VMS NATIONAL RESIDENTIAL PORTFOLIO I, an Illinois limited partnership

By:

MAERIL, INC., a Delaware  

                        corporation, its general partner

       By: /s/Patti K. Fielding

       Name:  Patti K. Fielding

                Title:  Executive Vice President  

                           and Treasurer

By:

VMS NATIONAL RESIDENTIAL PORTFOLIO II, an Illinois limited partnership

By:

MAERIL, INC., a Delaware  

                        corporation, its general partner

       By: /s/Patti K. Fielding

       Name:  Patti K. Fielding

                Title:  Executive Vice President  

                           and Treasurer

EX-10

Exhibit 10.15

SECURED PROMISSORY NOTE

755504

$13,800,000.00

January 1 , 2007

1.

FOR VALUE RECEIVED, VMS NATIONAL PROPERTIES, an Illinois general partnership, as "Borrower" ("Borrower"), hereby promises to pay to the order of PRINCIPAL LIFE INSURANCE COMPANY, an Iowa corporation (as "Lender"), the principal sum of Thirteen Million Eight Hundred Thousand and 00/100 Dollars ($13,800,000.00) or so much thereof as shall from time to time have been advanced, together with interest on the unpaid balance of said sum from January 1 , 2007 (the "Closing Date"), at the rate of six and sixteen one-hundredths percent (6.16%) per annum.  

A payment of interest from the Closing Date to and including January 31, 2007 shall be paid on the Closing Date calculated by multiplying the actual number of days elapsed in the period for which interest is being calculated by a daily rate based on the foregoing annual interest rate and a 360-day year.  Thereafter, interest shall be computed on the unpaid balance on the basis of a 360-day year composed of twelve 30-day months.  Beginning on March 1, 2007, interest shall be due and payable in installments of Seventy Thousand Eight Hundred Forty and 00/100 Dollars ($70,840.00), with an installment in a like amount due and payable on the same day of each month thereafter, and except as otherwise provided in this Note, all remaining principal and interest to the date of payment and other indebtedness shall be due and payable on February 1, 2010 ("Call Date").  Lender shall have the right to d eclare this Note to be due and payable in full on the Call Date or to adjust the per annum interest rate on the Rate Adjustment Date to an interest rate established by Lender ("Adjusted Interest Rate") as herein provided (and apply an amortization schedule, if any, as herein provided).  In the event Lender elects to declare this Note to be due and payable, this Note shall become due and payable, in full, without a Make Whole Premium on the Call Date.  In the event Lender elects to adjust the interest rate, then on February 1, 2010 ("Rate Adjustment Date") the per annum interest rate shall be adjusted to the Adjusted Interest Rate and commencing on March 1, 2010, monthly installments of principal (if applicable) and interest shall be due and payable on the same day of each month thereafter, except that all remaining principal and interest to the date of payment shall be due and payable on February 1, 2012 or such earlier date resulting from accelerati on of the Indebtedness by Lender ("Maturity Date").  Each installment shall be credited first upon interest then accrued and the remainder upon principal.  All principal and interest shall be paid in lawful money of the United States of America, by wire transfer of immediately available funds to Lender.  Any other monthly deposits or payments Borrower is required to make to Lender under the terms of the Loan Documents shall be made by the same payment method and on the same date as the installments of principal and interest due under this Note.

Lender shall notify Borrower in writing ("Lender's Election Notice") on or before November 1, 2009 of Lender's election to adjust the interest rate or of Lender's intention to

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declare this Note to be due and payable in full.  In the event Lender elects to adjust the interest rate, Lender's Election Notice will contain (i) the number of basis points ("Spread") and the United States Treasury Issue (which shall be the two (2) year United States Treasury Issue) that Lender anticipates it will use to establish the Adjusted Interest Rate and (ii) the amortization schedule Lender has elected to apply, if any.  The Spread shall be determined by Lender in its sole discretion based on Lender's evaluation of:  (i) the then current financial performance and projected risk of the Premises, which shall encompass various factors, including but not limited to contract debt service coverage, loan-to-value ratio, economic debt service coverage, occupancy, frequency of tenant rollover, financial strength and stability of tenants; (ii) the then current financial status of Borrower, which shall include but not be l imited to creditworthiness, financial strength, percentage of liabilities to liquid assets, and annual net income; and (iii) the remaining term and current outstanding balance of the Note.  

At any time and from time to time before the Adjusted Interest Rate is established, provided at least seven (7) days have elapsed since the previous Lender's Election Notice, Lender may establish a new Spread which Lender anticipates it will use to establish the Adjusted Interest Rate and notify Borrower of the same.  The Adjusted Interest Rate and amortization schedule, if any, must be established by mutual written agreement of Lender and Borrower by December 1, 2009 (the "Rate Set Deadline").  The Adjusted Interest Rate may only be established by mutual written agreement of Lender and Borrower and simultaneous payment by Borrower of Twelve Thousand Three Hundred and 00/100 Dollars ($12,300.00) ("Rate Adjustment Fee"). Notwithstanding anything contained herein to the contrary in the event:  (i) Lender notifies Borrower of its intention to declare this Note to be due and payable in full, (ii) Lender and Borrower are unable for any reason to mutually agree in writing on the Adjusted Interest Rate by the Rate Set Deadline; or (iii) Borrower fails to pay the Rate Adjustment Fee to Lender when due, this Note shall become due and payable in full, on the Call Date, without a Make Whole Premium, and all principal, interest accrued or to accrue to the date of prepayment at the rate in effect at the time of the initial Lender's Election Notice, and all other Indebtedness shall become immediately due and payable in full.  Notwithstanding any other provision herein, Lender shall not be obligated to adjust the interest rate if any default exists under this Note or the Loan Documents.

In the event Borrower accepts the Adjusted Interest Rate, then notwithstanding anything herein or in any of the Loan Documents to the contrary, Borrower shall have no right to prepay the Loan at par during the Open Period and any prepayment will be subject to a Make Whole Premium for the period ending on the Maturity Date calculated at the Adjusted Interest Rate.

In the event Borrower accepts the Adjusted Interest Rate, Borrower is required to provide Lender the following:

(i)

a new ALTA standard loan title policy for the Loan or an endorsement updating said title policy in the full amount of the in form and by an issuer satisfactory to Lender at the time of the rate adjustment unless (x) the outstanding balance of the

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Loan at the time of the Call Date is equal to or less than $20,000,000.00, (y) no liens or encumbrances exist against the Premises except as previously approved by Lender in the Deed of Trust, and (z) no mortgages or deeds of trust exist against the Premises except for the Mortgage.  Borrower further agrees that the policy shall insure Lender's Deed of Trust, at the Adjusted Interest Rate to be a first and prior lien subject only to those exceptions which were previously approved by Lender and provide coverage against mechanic's liens;

(ii)

an amendment to the Note in form and substance satisfactory to Lender executed by Borrower evidencing the Adjusted Interest Rate and a representation that the Premises is free and clear of any liens, privileges, mortgages or encumbrances except as expressly permitted in the Deed of Trust;

(iii)

a usury opinion or endorsement to the title policy acceptable to Lender if Lender reasonably believes that the Adjusted Interest Rate is or may be usurious; and

(iv)

a title search acceptable to Lender and reimbursement for Lender's costs incurred in obtaining the same.

2.

No privilege is reserved by Borrower to prepay any principal of this Note prior to the Maturity Date, except on or after the date hereof, privilege is reserved, after giving thirty (30) days' prior written notice to Lender, to prepay in full, but not in part, all principal and interest to the date on which payment is made, along with all sums, amounts, advances, or charges due under any instrument or agreement by which this Note is secured, upon the payment of a "Make Whole Premium" if required by the schedule below, provided that Borrower simultaneously exercises its right to prepay the Other Note as provided for therein.  The Make Whole Premium shall be based on the following schedule:

(i)

if prepayment occurs prior to March 1, 2008 or after February 1, 2010 and prior to March 1, 2011, the Make Whole Premium shall be one-half percent (.50%) of the principal amount to be prepaid;

(ii)

provided no Event of Default exists, during the period beginning on or after March 1, 2008 to and including February 1, 2010 or on or after March 1, 2011 to and including February 1, 2012 (each collectively the "Open Period") no Make Whole Premium shall be payable.

3.

Borrower agrees that if Lender accelerates the whole or any part of the principal sum evidenced hereby after the occurrence of an Event of Default but prior to the Open Period, Borrower waives any right to prepay said principal sum in whole or in part without premium and agrees to pay, as yield maintenance protection and not as a penalty, the Make Whole Premium.  

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In the event any proceeds from a casualty or Taking of the Premises are applied to reduce the principal balance hereof, such reduction shall be made without a Make Whole Premium, provided no Event of Default then exists under the Loan Documents.

Borrower by adding its initials to the end of this paragraph, (A) expressly waives any rights it may have under California Civil Code Section 2954.10 to prepay this Note, in whole or in part, without penalty, upon acceleration of the Indebtedness and (B) acknowledges and agrees that Borrower has no right of prepayment of this Note, except as provided above; and that, if the maturity of this Note is accelerated by Lender, Borrower specifically agrees to pay as a prepayment premium, the applicable sum specified herein as the Make Whole Premium, specifically including but not limited to the case where the holder of this Note has accelerated the maturity of this note due to Borrower's default of any provision contained in 2(f) of the Deed of Trust.  By initialing this provision, Borrower hereby declares that Lender's agreement to make the Loan evidenced by this Note for the interest rate and for the term set forth in this Note con stitutes adequate consideration, given individual weight by Borrower, for this waiver and agreement.

Initials: ________________    ________________

4.

If any payment of principal, interest, or other Indebtedness is not made when due, damages will be incurred by Lender, including additional expense in handling overdue payments, the amount of which is difficult and impractical to ascertain.  Borrower therefor agrees to pay, upon demand, the sum of four cents ($.04) for each one dollar ($1.00) of each said payment which becomes overdue ("Late Charge") as a reasonable estimate of the amount of said damages, subject, however, to the limitations contained in paragraph 6 hereof.

Notwithstanding anything hereinabove to the contrary, the Late Charge assessed on any amount due on the Maturity Date or the Call Date (if Lender declares this Note due and payable as described hereinabove) but not then paid, whether or not by acceleration, shall not be four cents for each one dollar as described above, but shall instead be a sum equal to the interest which would have accrued on the principal balance then outstanding from the date the payment was due to the end of the month in which the Maturity Date or Call Date (if applicable) occurs.  Such Late Charge shall be in addition to interest otherwise accruing under this Note.

5.

If any Event of Default has occurred and is continuing under the Loan Documents, the entire principal balance of the Loan, interest then accrued, and Make Whole Premium, and all other Indebtedness whether or not otherwise then due, shall at the option of Lender, become immediately due and payable without demand or notice, and whether or not Lender has exercised said option, interest shall accrue on the entire principal balance, interest then accrued, Make Whole Premium and any other Indebtedness then due, at a rate equal to the Default Rate until fully paid.

6.

Notwithstanding anything herein or in any of the other Loan Documents to the contrary, no provision contained herein or therein which purports to obligate Borrower to pay any amount

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of interest or any fees, costs or expenses which are in excess of the maximum permitted by applicable law, shall be effective to the extent it calls for the payment of any interest or other amount in excess of such maximum.  All agreements between Borrower and Lender, whether now existing or hereafter arising and whether written or oral, are hereby limited so that in no contingency, whether by reason of demand for payment or acceleration of the maturity hereof or otherwise, shall the interest contracted for, charged or received by Lender exceed the maximum amount permissible under applicable law.  If, from any circumstance whatsoever, interest would otherwise be payable to Lender in excess of the maximum lawful amount, the interest payable to Lender shall be reduced to the maximum amount permitted under applicable law; and if from any circumstance Lender shall ever receive anything of value deemed interest by applicable law in excess of the ma ximum lawful amount, an amount equal to any excessive interest shall, at the option of Lender, be refunded to Borrower or be applied to the reduction of the principal hereof, without a Make Whole Premium and not to the payment of interest or, if such excessive interest exceeds the unpaid balance of principal hereof such excess shall be refunded to Borrower.  This paragraph shall control all agreements between Borrower and Lender.

7.

Borrower and any endorsers or guarantors waive presentment, protest and demand, notice of protest, demand and dishonor and nonpayment, and agree the Maturity Date of this Note or any installment may be extended without affecting any liability hereunder, and further promise to pay all reasonable costs and expenses, including but not limited to, reasonable attorney's fees incurred by Lender in connection with any default or in any proceeding to interpret and/or enforce any provision of the Loan Documents.  No release of Borrower from liability hereunder shall release any other maker, endorser or guarantor hereof.

8.

This Note is secured by the Loan Documents creating among other things legal and valid encumbrances on and an assignment of all of Borrower's interest in any Leases of the Premises located in the county of Los Angeles, State of California.  Capitalized terms used herein and not otherwise defined shall have those meanings given to them in the Loan Documents.  In no event shall such documents be construed inconsistently with the terms of this Note, and in the event of any discrepancy between any such documents and this Note, the terms hereof shall govern.  The proceeds of this Note are to be used for business, commercial, investment or other similar purposes, and no portion thereof will be used for any personal, family or household use.  This Note shall be governed by and construed in accordance with the laws of the State where the Premises is located, without regard to its conflict of law principles.

9.

Notwithstanding any provision to the contrary in this Note or the Loan Documents and except as otherwise provided for below, the liability of Borrower under the Loan Documents shall be limited to the interest of Borrower in the Premises and the Rents.  In the event of foreclosure of the liens evidenced by the Loan Documents, no judgment for any deficiency upon the Indebtedness evidenced by the Loan Documents shall be sought or obtained by Lender against Borrower.  Nothing herein shall in any manner limit or impair (i) the lien or enforcement of the Loan Documents pursuant to the terms thereof or (ii) the obligations of any indemnitor or guarantor, if any.

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Notwithstanding any provision hereinabove to the contrary, Borrower shall be personally liable to Lender for:

(a)

any loss or damage to Lender arising from (i) the sale or forfeiture of the Premises resulting from Borrower's failure to pay any of the taxes, assessments or charges specified in the Loan Documents or (ii) Borrower's failure to insure the Premises in compliance with the provisions of the Loan Documents;

(b)

any event or circumstance for which Borrower indemnifies Lender under the Environmental Indemnity;

(c)

nonpayment of taxes, assessments, insurance premiums and utilities for the Premises and any penalty or late charge associated with nonpayment thereof prior to the Sale (as defined below) of the Premises;

(d)

any loss or damage to the Premises as a result of waste, gross negligence or willful misconduct by Borrower;  

(e)

intentionally deleted;

Borrower's personal liability for items specified in (c) and (d) above shall be limited to the amount of rents, issues, proceeds and profits from the Premises ("Rents and Profits") received by Borrower for the twenty-four (24) months preceding an Event of Default and thereafter; but less any such Rents and Profits applied to (A) payment of principal, interest and other charges when due under the Loan Documents, or (B) payment of expenses for the operation, maintenance, taxes, assessments, utility charges and insurance of the Premises including sufficient reserves for the same or replacements or renewals thereof ("Operation Expense(s)") provided that (x) Borrower has furnished Lender with evidence reasonably satisfactory to Lender of the Operation Expenses and payment thereof, and (y) any payments to parties related to Borrower shall be considered an Operation Expense only to the extent that the amount expended for the Operation Expense does not exceed the then current market rate for such Operation Expense.

(f)

misapplication or misappropriation of rents in violation of the Loan Documents;  

(g)

any security deposits of tenants not otherwise applied in accordance with the terms of the Lease(s), together with any interest on such security deposits required by law or the leases, not turned over to Lender upon conveyance of the Premises to Lender pursuant to foreclosure or power of sale or by a deed acceptable to Lender in form and content;

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(h)

any loss or damage to Lender arising from the misapplication or misappropriation of tax reserve accounts, tenant improvement reserve accounts, security deposits, prepaid rents or other similar sums paid to or held by Borrower or any other entity or person in connection with Borrower’s operation of the Premises;

(i)

any insurance or condemnation proceeds or other similar funds or payments applied by Borrower in a manner other than as expressly provided in the Loan Documents;

(j)

any loss or damage to Lender arising from any fraud or willful misrepresentation by or on behalf of Borrower, Interest Owner or any guarantor regarding the Premises, the making or delivery of any of the Loan Documents or in any materials or information provided by or on behalf of Borrower, Interest Owner or guarantor, if any, in connection with the Loan; and

(k)

any loss or damage to Lender arising from the loss of Lender’s perfection or priority of its security interest in personal property or fixtures covered under any UCC financing statement due to borrower’s failure to notify Lender as provided for in paragraph 1(h) of the Mortgage.

Notwithstanding anything contained in paragraphs 9(a)(i) and 9(c) hereinabove as it relates solely to taxes, assessments and insurance premiums, to the extent Lender is impounding for taxes, assessments and insurance premiums in accordance with the Loan Documents and Borrower has fully complied with all terms and conditions of the Loan Documents relating to impounding for the same, then Borrower shall not be personally liable for Lender's failure to apply any of said impound amounts held by Lender in accordance with the Loan Documents.

Notwithstanding anything to the contrary in the Loan Documents, the limitation on liability contained in the first paragraph of this paragraph 9 SHALL BECOME NULL AND VOID and shall be of no further force and effect in the event:

(y)

of any breach or violation of paragraph 2(f) (due on sale or encumbrance) of the Mortgage, other than (i) the filing of a nonmaterial mechanic's lien affecting the Premises or a mechanic's lien affecting the Premises for which Borrower has complied with the provisions of paragraph 1(e) of the Mortgage, or (ii) the granting of any utility or other nonmaterial easement or servitude burdening the Premises, or (iii) any transfer or encumbrance of a nonmaterial economic interest in the Premises not otherwise set forth in (i) or (ii), or (iv) an immaterial breach or violation of the Property Transfer Requirements, Ownership Transfer Requirements, Specific Transfer Requirements I-V or the Mezzanine Financing Requirements; or

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(z)

of any filing by Borrower of a petition in bankruptcy or insolvency or a petition or answer seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under the Bankruptcy laws of the United States or under any other applicable federal, state or other statute or law.

10.

If more than one, all obligations and agreements of Borrower are joint and several.

11.

This Note may not be changed or terminated orally, but only by an agreement in writing and signed by the party against whom enforcement of any waiver, change, modification or discharge is sought.  All of the rights, privileges and obligations hereunder shall inure to the benefit of the heirs, successors and assigns of Lender and shall bind the heirs and permitted successors and assigns of Borrower.  

12.

If any provision of this Note shall, for any reason, be held to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision hereof, but this Note shall be construed as if such invalid or unenforceable provision had never been contained herein.

13.

This Note may be executed in counterparts, each of which shall be deemed an original; and such counterparts when taken together shall constitute but one agreement.

14.

This provision does not represent a commitment by Lender to lend additional dollars (the "Additional Advance") to Borrower, as Lender is under no obligation to make an Additional Advance. Borrower may request Lender to fund to Borrower an additional advance of principal ("Request for Advance"), provided the requested Additional Advance, in combination with the original Loan, meet certain "Minimum Economic Criteria" (set forth below).    

If Lender does choose to make an Additional Advance, the following conditions precedent must be satisfied:

The "Minimum Economic Criteria" are:

(a)

The combined outstanding Indebtedness on the original Loan and the Additional Advance does not exceed seventy-seven percent (77%) of the appraised value of the Premises as established by an appraisal of the Premises prepared by an MAI appraiser approved by Lender and in form and substance acceptable to Lender, said appraisal at Borrower's cost;

(b)

Debt service of coverage of 1.20 times the annual debt service on the combined outstanding Indebtedness on the original Loan and the Additional Advance, as determined by Lender.  The debt service coverage shall be the annual net operating income divided by the total annual installment payments due under the combined outstanding Indebtedness on the original Loan and the Additional Advance, including accrued or capitalized interest.  Only net operating income from approved executed Leases in effect

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on the Premises with no uncured defaults shall be used in Lender's determination of the foregoing.  Borrower shall provide a certified rent roll with its Request for Advance; and

(c)

At the time of the Request for Advance, at least twelve (12) months must remain in the Loan term.

Provided no Event of Default exists under the Loan Documents, if Lender determines that the Minimum Economic Criteria are satisfied, Lender may notify Borrower in writing ("Lender's Notice") of the number of basis points ("Spread") and the United States Treasury Issue ("Treasury Issue") that Lender will use to establish the interest rate applicable to the Additional Advance ("AA Interest Rate").  The Spread shall be determined by the Lender, in its sole discretion.

At any time and from time to time before the date that the AA Interest Rate is agreed to, provided at least seven (7) days have elapsed since the previous Lender's Notice, Lender may establish a new Spread which Lender anticipates it will use to establish the AA Interest Rate and notify Borrower of the same.  The AA Interest Rate must be established by the date which is 30 days following the date of the initial Lender's Notice (the "AA Rate Set Deadline").  The AA Interest Rate may only be established on a date mutually agreed to by Lender and Borrower. If Borrower fails to respond to the most current Lender's Notice in writing by the AA Rate Set Deadline, all of the Lender's Notices shall be deemed rejected.  If Borrower rejects the terms set forth in the Lender's Notice, Borrower shall then have the right to obtain Mezzanine Financing on the terms set forth in the Mortgage.  If Borrower accepts the terms set forth in Lender's Notice, Lender shall agree to fund the Additional Advance, provided the following closing conditions ("Closing Conditions") are met:

(a)

Borrower's execution, delivery, acknowledgement and recordation, as applicable, of acceptable documentation evidencing and securing the Additional Advance including, but not limited to, additional note(s), revised and/or replacement loan modification agreements, indemnification agreements, escrow security or property reserve agreements, security instruments, financing statements, UCCs, new or revised letters of credit and/or guarantees in form and substance satisfactory to Lender;

(b)

Receipt of either (at Lender's discretion) a new ALTA standard loan policy or an endorsement updating the Lender's existing loan policy in the full amount of the Loan (as increased by the Additional Advance), in form and by an issuer satisfactory to Lender, and which insures the Mortgage to be a first and prior lien subject only to those exceptions which were previously approved by Lender and provides coverage against usury and mechanic's liens (an acceptable usury opinion can be substituted for the usury coverage);

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(c)

Compliance with Lender's then current underwriting and closing due diligence requirements.

(d)

Receipt of acceptable third party reports addressing property physical and environmental condition, upon request of Lender, prepared by consultants acceptable to Lender;

(e)

Payment by Borrower of all third party expenses incurred, including but not limited to outside counsel fees and costs;

(f)

Payment of Borrower of an "Additional Advance Fee" equal to .5% of the amount of the Additional Advance.  The Additional Advance Fee is non-refundable and is due upon Borrower's acceptance of the terms set forth in the Lender's Notice.

In the event (i) Lender does not choose to make the Additional Advance; (ii) Borrower rejects the terms set forth in the Lender's Notice, or (iii) Borrower is unable to satisfy the Closing Conditions, Borrower shall have the ability to obtain Mezzanine Financing as more particularly described in paragraph 2(f) of the Mortgage.

(Signatures on next page)

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IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed and delivered as of the date first set forth above.

VMS NATIONAL PROPERTIES, an Illinois general partnership

By:

VMS NATIONAL RESIDENTIAL PORTFOLIO I, an Illinois limited partnership

By:

MAERIL, INC., a Delaware  

                        corporation, its general partner

       By: /s/Patti K. Fielding

       Name:  Patti K. Fielding

                Title:  Executive Vice President  

                           and Treasurer

By:

VMS NATIONAL RESIDENTIAL PORTFOLIO II, an Illinois limited partnership

By:

MAERIL, INC., a Delaware  

                        corporation, its general partner

       By: /s/Patti K. Fielding

       Name:  Patti K. Fielding

                Title:  Executive Vice President  

                           and Treasurer

EX-10

Exhibit 10.16

Record and return to:

Principal Life Insurance Company

c/o Principal Real Estate Investors, LLC

801 Grand Avenue

Des Moines, IA  50392-1360

ATTN:  Erin Coghlan

DEED OF TRUST, SECURITY AGREEMENT

ASSIGNMENT OF RENTS AND FIXTURE FILING

THE NOTE SECURED BY THIS DEED OF TRUST CONTAINS AN

ADJUSTABLE INTEREST RATE

755504

A.

THIS DEED OF TRUST, SECURITY AGREEMENT AND ASSIGNMENT OF RENTS AND FIXTURE FILING (as the same may from time to time hereafter be modified, supplemented or amended, this "Deed of Trust") is made as of January 19, 2007, by and between VMS NATIONAL PROPERTIES, an Illinois general partnership, having its principal place of business and post office address at 4582 South Ulster Street Parkway, Suite 1100, Denver, Colorado 80237, as "Borrower" ("Borrower" to be construed as "Borrowers" if the context so requires), Brenda S. Tyler, of 801 Grand Avenue, Des Moines, Iowa, as "Trustee", and PRINCIPAL LIFE INSURANCE COMPANY, an Iowa corporation, as "Lender".

WITNESSETH:

B.

Borrower is justly indebted to Lender for money borrowed (the "Loan") in the original principal sum of Thirteen Million Eight Hundred Thousand and 00/100 Dollars ($13,800,000.00) (the "Loan Amount") evidenced by Borrower's secured promissory note of even date herewith, made payable and delivered to Lender (as may be modified, amended, supplemented, extended or consolidated in writing and any note(s) issued in exchange therefor or replacement thereof) (the "Note"), in which Note Borrower promises to pay to Lender the Loan Amount, together with all accrued and unpaid interest thereon, interest accrued at the Default Rate (if any), Late Charges (if any), the Make Whole Premium (if any), and all other obligations and liabilities due or to become due to Lender pursuant to the Loan Documents and all other amounts, sums and expenses paid by or payable to Lender pursuant to the Loan Documents and the Environmental Indemnity (collectively the "Indebtedness") until the Indebtedness has been paid, but in any event, the unpaid balance (if any) remaining due on the Note shall be due and payable on February 1, 2012

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(the "Maturity Date") or such earlier date resulting from the acceleration of the Indebtedness by Lender.  Capitalized terms used herein and not otherwise defined shall have those meanings given to them in the other Loan Documents.

C.

NOW, THEREFORE, to secure the payment of the Indebtedness in accordance with the terms and conditions of the Loan Documents, and all extensions, modifications, and renewals thereof and the performance of the covenants and agreements contained therein, and also to secure the payment of any and all other Indebtedness, direct or contingent, that may now or hereafter become owing from Borrower to Lender in connection with the Loan Documents, and in consideration of the Loan Amount in hand paid, receipt of which is hereby acknowledged, Borrower does by these presents irrevocably grant, transfer and assign in trust with power of sale and right of entry and possession unto Trustee, its successors and assigns forever, that certain real estate and all of Borrower's estate, right, title and interest therein, located in the county of Los Angeles, state of California, more particularly described in Exhibit A attached hereto and made a part hereof (the "Land"), which Land, together with the following described property, rights and interests, is collectively referred to herein as the "Premises".

D.

Together with Borrower's interest as lessor in and to all Leases and all Rents, which are pledged primarily and on a parity with the Land and not secondarily.

E.

Together with all and singular the tenements, hereditaments, easements, appurtenances, passages, waters, water courses, riparian rights, direct flow, ditch, reservoir, well and other water rights, whether or not adjudicated, whether tributary or nontributary and whether evidenced by deed, water stock, permit or otherwise, sewer rights, rights in trade names, licenses, permits and contracts, and all other rights, liberties and privileges of any kind or character in any way now or hereafter appertaining to the Land, including but not limited to, homestead and any other claim at law or in equity as well as any after-acquired title, franchise or license and the reversion and reversions and remainder and remainders thereof.

F.

Together with the right in the case of foreclosure hereunder of the encumbered property for Lender to take and use the name by which the buildings and all other improvements situated on the Premises are commonly known and the right to manage and operate the said buildings under any such name and variants thereof.

G.

Together with all right, title and interest of Borrower in any and all buildings and improvements of every kind and description now or hereafter erected or placed on the said Land and all materials intended for construction, reconstruction, alteration and repairs of such buildings and improvements now or hereafter erected thereon, all of which materials shall be deemed to be included within the Premises immediately upon the delivery thereof to the Premises, and all fixtures now or hereafter owned by Borrower and attached to or contained in and used exclusively in connection with the Premises including, but not limited to, all machinery, motors, elevators, fittings, radiators, awnings, shades, screens, all gas and electric fixtures, appliances (including without limitation, ranges, rangetops, ovens, stoves, cooking apparatus and appurtenances, dishwashers, refrigerators, trash compactors, microwaves, washers, dryers, and

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garbage disposals), water heaters, mirrors, mantels, carpeting and all other floor coverings, window coverings and treatments, cable television equipment, water softeners, storm sashes, and all plumbing, heating, lighting, ventilating, refrigerating, incinerating, air-conditioning and sprinkler equipment and fixtures and appurtenances thereto; and all items of furniture, furnishings, equipment and personal property owned by Borrower used exclusively in the operation of the Premises; and all renewals or replacements of all of the aforesaid property owned by Borrower or articles in substitution therefor, whether or not the same are or shall be attached to said buildings or improvements in any manner (collectively, the "Improvements"); it being mutually agreed, intended and declared that all the aforesaid property owned by Borrower and placed by it on the Land or used exclusively in connection with the operation or maintenance of the Premi ses shall, so far as permitted by law, be deemed to form a part and parcel of the Land and for the purpose of this Deed of Trust to be Land and covered by this Deed of Trust, and as to any of the property aforesaid which does not form a part and parcel of the Land or does not constitute a "fixture" (as such term is defined in the Uniform Commercial Code ("UCC")), this Deed of Trust and the other Loan Documents (the terms of which grant a security interest in personal property or real property, the proceeds of which may become personal property) are each hereby deemed to be, as well, a security agreement under the UCC for the purpose of creating a security interest in all items, including, but not limited to, all property and rights which Borrower may grant, assign, bargain, sell, transfer, set over, deliver, or otherwise convey to Lender, as secured party, under the terms of this Deed of Trust or any of the other Loan Documents, including any and all proceeds thereof (as used herein, Borr ower shall mean "Debtor" under the UCC and Lender shall mean "Secured Party" under the UCC).  Borrower hereby appoints Lender as its attorney-in-fact to execute such documents necessary to perfect Lender's security interest and authorizes Lender at any time until the Indebtedness is paid in full, to prepare and file, at Borrower's expense, any and all UCC financing statements, amendments, assignments, terminations and the like, necessary to create and/or maintain a prior security interest in such property all without Borrower's execution of the same.  Furthermore, upon a default under the Loan Documents, Lender will, in addition to all other remedies provided for in the Loan Documents, have the remedies provided for under the UCC in effect in the state in which the Premises is located.

H.

Together with all right, title and interest of Borrower, now or hereafter acquired, in and to any and all strips and gores of land adjacent to and used in connection with the Premises and all right, title and interest of Borrower, now owned or hereafter acquired, in, to, over and under the ways, streets, sidewalks and alleys adjoining the Premises.  

I.

Together with all funds now or hereafter held by Lender under any property reserves agreement (including any proceeds derived from any letter of credit) or escrow security agreement or under any of the terms hereof or of the Loan Documents, including but not limited to funds held under the provisions of paragraph 5 hereof.

J.

Together with all of Borrower's payment intangibles, letter of credit rights, interest rate cap agreements, tenant in common agreement rights, and any other contract rights of Borrower

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related in any manner to the ownership, operation, or management of the Premises, as well as any and all supporting obligations, and all proceeds, renewals, replacements and substitutions thereof.

K.

Together with all funds, accounts and proceeds thereof relating to the Premises whether or not such funds, accounts or proceeds thereof are held by Lender under the terms of any of the Loan Documents, including, but not limited to bankruptcy claims of Borrower against any tenant at the Premises, and any proceeds thereof; proceeds of any Rents, insurance proceeds from all insurance policies required to be maintained by Borrower under the Loan Documents and all awards, decrees, proceeds, settlements or claims for damage now or hereafter made to or for the benefit of Borrower by reason of any damage to, destruction of or taking of the Premises or any part thereof, whether the same shall be made by reason of the exercise of the right of eminent domain or by condemnation or otherwise (a "Taking").

L.

TO HAVE AND TO HOLD the same unto Trustee, Trustee's successors and assigns, upon the trusts, covenants and agreements herein expressed.  

M.

Borrower represents that it is the absolute owner in fee simple of the Premises described in Exhibit A, which Premises are free and clear of any liens or encumbrances except as set forth in the loan policy of title insurance for the Premises issued to Lender, and except for taxes which are not yet due or delinquent.  Borrower shall forever warrant and defend the title to the Premises against all claims and demands of all persons whomsoever and will on demand execute any additional instrument which may be required to give Trustee a valid first lien on all of the Premises, subject to the "Permitted Encumbrances" set forth in the loan policy of title insurance for the Premises issued to Lender.  

N.

Borrower further represents that (i) the Premises is not subject to any casualty damage; (ii) Borrower has not received any written notice of any eminent domain or condemnation proceeding affecting the Premises; (iii) all leasing broker fees and commissions payable by Borrower with respect to the Lease(s) have been paid in full, in cash or other form of immediately available funds; (iv) to the best of Borrower's knowledge, following due and diligent inquiry, there are no actions, suits or proceedings pending, completed or threatened against or affecting Borrower or any person or entity owning an interest (directly or indirectly) in Borrower ("Interest Owner(s)") or any property of Borrower or any Interest Owner in any court or before any arbitrator of any kind or before or by any governmental authority (whether local, state, federal or foreign) that, individually or in the aggregate, could reasonably be expected by Len der to be material to the transaction contemplated hereby and (v) the Premises and the intended uses thereof are in compliance with all applicable laws, regulations and ordinances, including without limitation, the Americans with Disabilities Act of 1990 (42 U.S.C. §12101, et seq.), the Federal Architectural Barriers Act (42 U.S.C. §3601, et seq.), the Fair Housing Amendments Act of 1988 (42 U.S.C. §3601, et seq.), and the Rehabilitation Act of 1973 (29 U.S.C. §794) and any amendments, modifications or supplements thereto.

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O.

Borrower further represents and warrants that as of the date hereof and until the Indebtedness is paid in full

(a)

Borrower and each person or entity owning an interest in Borrower is not and will not be (i) identified on the Specially Designated Nationals and Blocked Persons List maintained by the Office of Foreign Assets Control, Department of the Treasury ("OFAC") and/or on any other similar list maintained by OFAC pursuant to any authorizing statute, executive order or regulation (collectively, the "List"), (ii) a person or entity with whom a citizen of the United States is prohibited to engage in transactions by any trade embargo, economic sanction, or other prohibition of United States law, regulation, or Executive Order of the President of the United States;

(b)

none of the funds or other assets of Borrower constitute or will constitute property of, or are or will be beneficially owned, directly or indirectly, by any Embargoed Person (as hereinafter defined);

(c)

no Embargoed Person has or will have any interest of any nature whatsoever in Borrower (whether directly or indirectly);

(d)

none of the funds of Borrower have been or will be derived from any unlawful activity with the result that the investment in Borrower is prohibited by law or that the Loan Documents are in or will be in violation of law,

(e)

Borrower has and will continue to implement procedures, and has consistently and will continue to consistently apply those procedures, to ensure the foregoing representations and warranties remain true and correct at all times.  The term "Embargoed Person" means any person, entity or government subject to trade restrictions under U.S. law, including but not limited to, the International Emergency Economic Powers Act, 50 U.S.C. §1701 et seq., The Trading with the Enemy Act, 50 U.S.C. App. 1 et seq., and any Executive Orders or regulations promulgated thereunder with the result that the investment in Borrower is prohibited by law or Borrower is in violation of law;

(f)

Borrower has complied and will continue to comply with all requirements of law relating to money laundering, anti-terrorism, trade embargos and economic sanctions, now or hereafter in effect;

(g)

Borrower has not and will not use funds from any "Prohibited Person" (as such term is defined in the September 24, 2001 Executive Order Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism) to make any payment due to Lender under the Loan Documents

-6-

Borrower will immediately notify Lender in writing if any of the representations, warranties or covenants are no longer true or have been breached or if Borrower has a reasonable basis to believe that they may no longer be true or have been breached.  In addition, Borrower will, at the request of Lender, provide such information as may be requested by Lender to determine Borrower's compliance with the terms hereof.

P.

Borrower further represents and warrants that as of the date hereof and until the Indebtedness is paid in full: (i) Borrower is not and will not be an "employee benefit plan" as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), which is subject to Title I of ERISA; (ii) the assets of Borrower do not and will not constitute "plan assets" of one or more such plans for purposes of Title I of ERISA; (iii) Borrower is not and will not be a "governmental plan" within the meaning of Section 3(32) of ERISA; (iv) transactions by or with Borrower are not and will not be subject to state statutes applicable to Borrower regulating investments of and fiduciary obligations with respect to governmental plans; (v) Borrower has made and will continue to make all required contributions to all employee benefit plans, if any, established for or on behalf of Borrower or to which Borrower is required to contribute; (vi) Borrower has and will continue to administer each such plan, if any, in accordance with its terms and the applicable provisions of ERISA and any other federal or state law; and (vii) Borrower has not and will not permit any liability under Sections 4201, 4243, 4062 or 4069 of Title IV of ERISA or taxes or penalties relating to any employee benefit plan or multi-employer plan to become delinquent or assessed, respectively, which would have a material adverse effect upon (i) the business or the financial position or results of operation of Borrower, (ii) the ability of Borrower to perform, or of Lender to enforce, any of the Loan Documents or Environmental Indemnity, or (iii) the value of the Premises.

BORROWER COVENANTS AND AGREES AS FOLLOWS:  

1.

Borrower shall

(a)

pay each item of Indebtedness secured by this Deed of Trust when due according to the terms of the Loan Documents;

(b)

pay a Late Charge on any payment of principal, interest, Make Whole Premium or Indebtedness which is not paid on or before the due date thereof to cover the expense involved in handling such late payment;

(c)

pay on or before the due date thereof any indebtedness permitted to be incurred by Borrower pursuant to the Loan Documents and any other claims which could become a lien on the Premises (unless otherwise specifically addressed in paragraph 1(e) hereof), and upon request of Lender exhibit satisfactory evidence of the discharge thereof;

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(d)

complete within a reasonable time, the construction of any Improvements now or at any time in process of construction upon the Land;

(e)

manage, operate and maintain the Premises and keep the Premises, including but not limited to, the Improvements, in good condition and repair and free from mechanics' liens or other liens or claims for liens, provided however, that Borrower may in good faith, with reasonable diligence and upon written Notice to Lender within thirty (30) days after Borrower has knowledge of such lien or claim, contest the validity or amount of any such lien or claim and defer payment and discharge thereof during the pendency of such contest in the manner provided by law, provided that (i) such contest may be made without the payment thereof; (ii) such contest shall prevent the sale or forfeiture of the Premises or any part thereof, or any interest therein, to satisfy such lien or claim; (iii) Borrower shall have obtained a bond over such lien or claim from a bonding company acceptable to Lender which has the effect of removing such lien or collection of the claim or lien so contested; and (iv) Borrower shall pay all costs and expenses incidental to such contest; and further provided, that in the event of a final, non-appealable ruling or adjudication adverse to Borrower, Borrower shall promptly pay such claim or lien, shall indemnify and hold Lender and the Premises harmless from any loss or damage arising from such contest and shall take whatever action necessary to prevent sale, forfeiture or any other loss or damage to the Premises or to the Lender;  

(f)

comply, and cause each lessee or other user of the Premises to comply, with all requirements of law and ordinance, and all rules and regulations, now or hereafter enacted, by authorities having jurisdiction of the Premises and the use thereof, including but not limited to all covenants, conditions and restrictions of record pertaining to the Premises, the Improvements, and the use thereof (collectively, "Legal Requirements");

(g)

subject to the provisions of paragraph 6 hereof, promptly repair, restore or rebuild any Improvements now or hereafter a part of the Premises which may become damaged or be destroyed by any cause whatsoever, so that upon completion of the repair, restoration and rebuilding of such Improvements, there will be no liens of any nature arising out of the construction and the Premises will be of substantially the same character and quality as it was prior to the damage or destruction;

(h)

if other than a natural person, do all things necessary to preserve and keep in full force and effect its existence, franchises, rights and privileges under the laws of the state of its formation and, if other than its state of

-8-

formation, the state where the Premises is located.  Borrower shall notify Lender at least thirty (30) days prior to (i) any relocation of Borrower's principal place of business to a different state or any change in Borrower's state of formation, and/or (ii) if Borrower is an individual, any relocation of Borrower's principal residence to a different state;

(i)

do all things necessary to preserve and keep in full force and effect Lender's title insurance coverage insuring the lien of this Deed of Trust as a first and prior lien, subject only to the Permitted Encumbrances stated in the title insurance policy issued to Lender and any other exceptions after the date of this Deed of Trust approved in writing by Lender, including without limitation, delivering to Lender not less than 30 days prior to the effective date of any rate adjustment, modification or extension of the Note or any other Loan Document, any new policy or endorsement which may be reasonably required to assure Lender of such continuing coverage;

(j)

execute any and all documents which may be required to perfect the security interest granted by this Deed of Trust; and

(k)

comply and cause the Premises and the intended uses thereof to comply with all laws, rules, and regulations affecting the Premises or any portion thereof or any use thereof and, upon request by Lender, provide Lender with such evidence as may be reasonably required by Lender to confirm such compliance, such evidence to include, without limitation, letters, licenses, permits, certificates and other correspondence from the appropriate governmental authorities, and opinions or certifications from architects or engineers.  The laws, regulations and ordinances with which compliance should be evidenced include, in addition to the foregoing and without limitation, the following:  building codes, health and environmental protection laws, erosion control ordinances, federal statutes, doing business and/or licensing laws and zoning laws (the evidence submitted as to zoning should include the zoning designation made for the Premises, the permitted uses of the Premises under such zoning designation and zoning requirements as to parking, lot size, ingress, egress and building setbacks).

(l)

in the event Permitted Transfer (viii) of paragraph 2(f) occurs, remain a Single-Asset Entity;  

As used herein, the term Single-Asset Entity means:

a corporation, limited or general partnership, limited liability company, or business trust which, at all times until the Indebtedness is paid in full (i) will not

-9-

have any other assets other than the Premises, cash and marketable securities, and (ii) will not create, assume, incur, guarantee or become liable for debt, obligations, or performance of obligations for the benefit of any other person or entity except for liabilities incurred in the normal operation of the Premises (other than liabilities secured by the Premises).

2.

Borrower shall not:

(a)

except as required by applicable Legal Requirements, construct any building or structure nor make any alteration or addition (other than normal repair and maintenance) to (i) the roof or any structural component of any Improvements on the Premises, or (ii) the building operating systems, including but not limited to, the mechanical, electrical, heating, cooling, or ventilation systems (other than replacement with equal or better quality and capacity), without the prior written consent of Lender not to be unreasonably withheld;

(b)

remove or demolish any material Improvements, or any portion thereof, which at any time constitutes a part of the Premises.

Notwithstanding anything hereinabove to the contrary, Borrower may construct, remove or demolish tenant improvements within the then existing building(s) or other structures to the extent such work is required solely under the terms of any Leases approved by Lender provided (i) no Event of Default exists under the Loan Documents; (ii) the work is completed on a timely basis, in a good, workmanlike, lien-free manner and in accordance with all Legal Requirements, and (iii) such work does not negatively affect the structural integrity of the Improvements or the value of the Premises;

(c)

cause or permit any change to be made in the general use of the Premises without Lender's prior written consent;

(d)

initiate any or acquiesce to a zoning reclassification or material change in zoning without Lender's prior written consent.  Borrower shall use all reasonable efforts to contest any such zoning reclassification or change;

(e)

make or permit any use of the Premises that could with the passage of time result in the creation of any right of use, or any claim of adverse possession or easement on, to or against any part of the Premises in favor of any person or entity or the public;

(f)

allow any of the following to occur (unless a Permitted Transfer):

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(i)

a Transfer of all or any portion of the Premises or any interest in the Premises;

(ii)

a Transfer of any ownership interest in Borrower or any entity which owns, directly or indirectly, an interest in Borrower at any level of the ownership structure; or

(iii)

in addition to (i) and (ii) above, if the Borrower is a trust, or if a trust owns an interest, directly or indirectly, in any entity which owns an interest in Borrower at any level of the ownership structure, the addition, deletion or substitution of a trustee of such trust.  

If any of such events occur, it shall be null and void and shall constitute an Event of Default under the Loan Documents.

It is understood and agreed that the Indebtedness evidenced by the Note is personal to Borrower and in accepting the same Lender has relied upon what it perceived as the willingness and ability of Borrower to perform its obligations under the Loan Documents and the Environmental Indemnity and as lessor under the Leases of the Premises.  Furthermore, Lender may consent to a Transfer and expressly waive Borrower's covenants contained in this paragraph 2(f), in writing to Borrower; however any such consent and waiver shall not constitute any consent or waiver of such covenants as to any Transfer other than that for which the consent and waiver was expressly granted.  Furthermore, Lender's willingness to consent to any Transfer and waive Borrower's covenants contained in this paragraph 2(f), implies no standard of reasonableness in determining whether or not such consent shall be granted and the same may be based upon what Lend er solely deems to be in its best interest.

For purposes of the Loan Documents, the following terms shall have the respective meanings set forth below:

"Transfer" or "Transferred" shall mean with respect to the Premises, an interest in the Premises, or an ownership interest or interest therein:

(i)

a sale, assignment, transfer, conveyance or other disposition (whether voluntary, involuntary or by operation of law);

(ii)

the creation, sufferance or granting of any lien, encumbrance, security interest or collateral assignment (whether voluntarily, involuntarily or by operation of law), other than the lien hereof, the

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leases of the Premises assigned to Lender, the Permitted Encumbrances and those liens which Borrower is contesting in accordance with the provisions of paragraph 1(e);

(iii)

the issuance or other creation of ownership interests in an entity;

(iv)

the reconstitution or conversion from one entity to another type of entity;

(v)

a merger, consolidation, reorganization or any other business combination; or

(vi)

a conversion to or operation of all or any portion of the Premises as a cooperative or condominium form of ownership.

"Permitted Transfer" shall mean:

(i)

a minor (as determined by Lender) conveyance of an interest in the Premises by Borrower, such as a utility easement, and for which Lender has given its prior written consent and imposed such conditions as Lender deems advisable and appropriate;

(ii)

a sale, assignment, transfer or conveyance of all or any portion of the Premises or an interest in the Premises for which Borrower has complied with all of the Property Transfer Requirements;

(iii)

any of the following Transfers for which Borrower has complied with all of the Ownership Transfer Requirements as applicable and Lender has given its prior written consent (and in connection with such consent, Lender may impose any conditions it wishes in its reasonable discretion);

(A)

a sale, assignment, transfer, or conveyance of an ownership interest or interest therein;

(B)

the issuance or other creation of ownership interests in an entity;

(C)

a reconstitution or conversion from one entity to another type of entity;

(D)

a merger, consolidation, reorganization or any other business combination;

(iv)

transfers of general partner interest in Borrower between VMS National Residential Portfolio I and VMS National Residential Portfolio II ("Borrower Interest Owners") for which Borrower has complied with all of the Specific Transfer Requirements I;

(v)

transfers of general partner interests in Borrower that represent less than 49%, individually or in the aggregate, of all ownership interests in Borrower to individuals or entities other than Borrower Interest Owners for which Borrower has complied with all of the Specific Transfer Requirements II;

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(vi)

Borrower's right to obtain mezzanine financing for which Borrower has complied with all the Mezzanine Financing Requirements;

(vii)

any assumption of less than 100% of the limited partnership interests in Borrower Interest Owners by any affiliate of AIMCO REIT for which Borrower has complied with all of the Specific Transfer Requirements III;

(viii)

conversion of the Borrower to a Single Asset Entity (as defined in paragraph 1(l)) wholly owned by AIMCO REIT and/or AIMCO OP and transfer of the Premises to said Single Asset Entity for which Borrower has complied with all of the Specific Transfer Requirements IV;

(ix)

a transfer of any general partnership interest in Borrower to a Qualified REIT Subsidiary, as defined in Section 856(i)(2) of the Internal Revenue Code of 1986, 100% owned by AIMCO REIT or to a Qualified REIT Subsidiary, as defined in Section 856(e)(1) of the Internal Revenue Code of 1986, 100% owned by AIMCO OP for which Borrower has complied with all of the Specific Transfer Requirements V;

(ix)

a transfer of shares of common stock, limited partnership interests or other beneficial or ownership interests or other forms of securities in AIMCO REIT or AIMCO OP (defined below), and the issuance of all varieties of convertible debt, equity and other similar securities of AIMCO REIT or AIMCO OP, and the subsequent transfer of such securities; provided, however, that no Change of Control (defined below) occurs as a result of such transfer, either upon such transfer or upon the subsequent conversion to equity of such convertible debt or other securities.

(x)

The issuance by AIMCO REIT or AIMCO OP of additional common stock, limited partnership interests or other beneficial or ownership interests, convertible debt, equity and other similar securities, and the subsequent transfer of such convertible debt or securities; provided, however, that no Change of Control occurs as the result of such transfer, either upon such transfer or upon the subsequent conversion to equity of such convertible debt or other securities.

(xi)

So long as AIMCO REIT owns 100% of the stock of AIMCO-LP, Inc. and AIMCO-GP, Inc. (and AIMCO-GP, Inc. remains the general partner of AIMCO OP), a transfer of limited partnership interests that results in AIMCO-LP, Inc. owning not less than 50.1% of the limited partnership interests in AIMCO OP.

For purposes of this Permitted Transfer Section, the following terms shall

be defined as follows:

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(A)

"Change of Control" shall mean the earliest to occur of (1) the date an Acquiring Person becomes (by acquisition, consolidation, merger or otherwise), directly or indirectly, the beneficial owner of more than forty percent (40%) of the total Voting Equity Capital of AIMCO REIT then outstanding, or (2) the date on which AIMCO REIT shall cease to hold (whether directly or indirectly through a wholly owned intermediary entity such as AIMCO-LP, Inc. or AIMCO-GP, Inc.) at least 50.1% of the limited partnership interests in AIMCO OP, or (3) the date on which AIMCO REIT shall cease for any reason to hold (whether directly or indirectly) (i) the interests in the Managing General Partner held as of the date of this Deed of Trust (as evidenced by organizational charts and documents submitted to Lender as of such date) and (ii) the Controlling Interest(s) in the Borrower, or (4) the replacement (other than solely by reason of retireme nt at age sixty-five or older, death or disability) of more than 50% (or such lesser percentage as is required for decision making by the board of directors of trustees, if applicable) of the members of the board of directors (or trustee, if applicable) of AIMCO REIT over a one-year period where such replacement shall not have been approved by a vote of at least a majority of the board of directors (or trustees, if applicable) of AIMCO REIT then still in office who either were members of such board of directors (or trustees, if applicable) at the beginning of such one year period or whose election as members of the board of directors (or trustees, if applicable) was previously so approved.

(B)

"Acquiring Person" shall mean a "person" or, group of "persons" within the meaning of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended. However, notwithstanding the foregoing, "Acquiring Person" shall not be deemed to include any member of the Borrower Control Group unless such member has, directly or indirectly, disposed of, sold or otherwise transferred to, or encumbered or restricted (whether by means of voting trust agreement or otherwise) for the benefit of an Acquiring Person, all or any portion of the Voting Equity Capital of AIMCO RElT directly or indirectly owned or controlled by such member or such member directly or

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indirectly votes all or any portion of the Voting Equity Capital of AIMCO REIT, directly or indirectly, owned or controlled by such member for the taking of any action which, directly or indirectly constitutes or would result in a Change of Control, in which event such member of the Borrower Control Group shall be deemed to constitute an Acquiring Person to the extent of the Voting Equity Capital of AIMCO REIT owned or controlled by such member.

(C)

"Borrower Control Group" shall mean a majority of the Board of Directors of AIMCO REIT.

(D)

A "Person" shall mean an individual, an estate, a trust, a corporation, a partnership, a limited liability company or any other organization or entity (whether governmental or private).

(E)

"Security" shall have the same meaning as in Section 2(1) of the Securities Act of 1933, as amended.

(F)

"Controlling Interest(s)" shall mean (i) with respect to a partnership, such majority and/or managing general partner interests which, together with a majority of limited partnership interests if necessary for consent purposes, vest in the holder of such interests the sale power, right and authority to control the day to day operations of the Borrower; including, without limitation, the authority to manage, operate and finance the Premises, (ii) with respect to a corporation, the number of shares which entitle the holder to elect a majority of the board of directors of the Borrower, and (iii) with respect to a limited liability company, such majority and/or managing member interests as vest in the holder of such interests the sole power, right and authority to control the day to day operations of the Borrower; including, without limitation, the authority to manage, operate and finance the Premises.

(G)

"AIMCO REIT" shall mean Apartment Investment and Management Company, a corporation organized and existing under the laws of the State of Maryland.

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(H)

"AIMCO OP" shall mean AIMCO Properties, L.P., a limited partnership organized and existing under the laws of the State of Delaware.

(I)

"Managing General Partner" shall mean the entity executing this Deed of Trust on behalf of the Borrower and/or its successors or assigns in interest.

(J)

"Voting Equity Capital" shall mean securities of any class or classes, the holders of which are ordinarily, in the absence of contingencies, entitled to elect a majority of the board of directors (or Persons performing similar functions).

"Property Transfer Requirements" are all of the following:

1.

Prior review and approval of the proposed purchaser or other transferee and the subject transaction by Lender, at Lender's reasonable discretion.  Review of the proposed purchaser or other transferee and the subject transaction shall encompass various factors, including, but not limited to, the proposed purchaser's or other transferee's creditworthiness, financial strength, and real estate management and leasing expertise as well as the proposed transaction's effect on the Premises, the Borrower, and other security for the Loan;

2.

Payment to Lender of an assumption fee equal to one percent (1%) of the principal balance of the Note; provided, however, that Lender will require up to $15,000.00 of such fee to be paid at the beginning of Lender's review process, and such sum shall be nonrefundable and earned upon receipt by Lender whether or not the transaction is ultimately completed or Lender ultimately approves the proposed purchaser or other transferee;

3.

Receipt, at Borrower's expense, of either (at Lender's discretion) a new ALTA standard loan policy or an endorsement updating the Lender's existing loan policy in the full amount of the Loan, in form and by an issuer satisfactory to Lender, and which insures this Deed of Trust to be a first and prior lien subject only to those exceptions which were previously approved by Lender and provides coverage against usury and mechanic's liens;

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4.

Receipt by Lender of copies of all relevant information and documentation relating to or required by Lender in connection with the proposed transfer including but not limited to (a) the organizational documents of the proposed transferee and an opinion of counsel satisfactory to Lender as to its due formation, valid existence and authority to enter into and carry out the proposed transaction; (b) the deeds or other instruments of transfer and documents relating to the assignment and assumption of Leases; (c) evidence of compliance with the insurance requirements contained in the Loan Documents; and (d) compliance with such other closing requirements as are customarily imposed by Lender in connection with such transactions;

5.

Execution, delivery, acknowledgment and recordation, as applicable, of new, revised and/or replacement assumption agreements, loan modification agreements, indemnification agreements, escrow security or property reserves agreements, security instruments, financing statements, UCCs, new or revised letters of credit and/or guarantees in form and substance reasonably satisfactory to Lender;

6.

Payment of outside counsel fees and costs, other applicable professional's fees and costs, taxes, recording fees and the like, and any other fees and costs incurred; and

7.

Receipt by Lender of 60 days advance written notice of the proposed Transfer in question.

"Ownership Transfer Requirements" are all of the Property Transfer Requirements which Lender deems appropriate in its reasonable discretion, as well as a reasonable processing fee to be determined by Lender; provided, however, that (i) with respect to item 2 of the Property Transfer Requirements, the 1% fee shall be prorated (subject, however, to a $15,000 minimum) based on Lender's calculation of the effective percentage interest in Borrower transferred, and (ii) item 3 of the Property Transfer Requirements shall be required, at Lender's reasonable discretion, only in the event of (A) a merger, consolidation, reorganization or any other business combination, or (B) a reconstitution or conversion from one entity to another type of entity.

"Specific Transfer Requirements I" are all of the following:  

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1.

AIMCO REIT (as defined below) and/or AIMCO OP (as defined below) (collectively) retain 20% indirect ownership interest in and retain management and control of Borrower and there is no change in the management and day-to-day operations at the Premises, unless otherwise approved by Lender;

2.

Lender receives notice of such transfer within thirty (30) days of the consummation of such transfer; and

3.

Lender receives an organizational chart for Borrower which includes ownership breakdowns for all entity levels and is certified by Borrower as true and correct.

Specific Transfer Requirements II are all of the following:

1.

AIMCO REIT and/or AIMCO OP (collectively) retain 20% indirect ownership interest in and retain management and control of Borrower and there is no change in the management and day-to-day operations at the Premises, unless otherwise approved by Lender;

2.

Lender receives notice of such transfer within thirty (30) days of the consummation of such transfer along with the organizational documents of the transferee;

3.

At Lender's option, Lender receives an acceptable background and credit check, at Borrower's cost, for the proposed transferee if said proposed transferee's interest in Borrower will equal or exceed 20%;

4.

At Lender's option, Lender receives an acceptable OFAC report (research of the Office of Foreign Assets Control "Watched" companies list), at Borrower's cost;

5.

Lender receives an organizational chart for Borrower which includes ownership breakdowns for all entity levels and is certified by Borrower as true and correct; and

6.

Lender receives payment of an assumption fee equal to the greater of: (a) one-half percent (0.5%) of the outstanding principal balance of the Note prorated based on Lender's calculation of the effective percentage interest in Borrower transferred; or (b) $3,000.00.

Specific Transfer Requirements III are all of the following:

1.

AIMCO REIT and/or AIMCO OP (collectively) retain 20% indirect ownership interest in and retain management and control of Borrower and there is no change in the management and day-to-day operations at the Premises, unless otherwise approved by Lender;

2.

Lender receives notice of such transfer within thirty (30) days of the consummation of such transfer;

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3.

Lender receives an organizational chart for Borrower which includes ownership breakdowns for all entity levels and is certified by Borrower as true and correct; and

4.

Lender receives a processing fee of $500.00.

Specific Transfer Requirements IV are all of the following:

1.

Property Transfer Requirements 3-7; and

2.

Lender receives a processing fee of $3,000.00.

Specific Transfer Requirements V are all of the following:

1.

AIMCO REIT and/or AIMCO OP (collectively) retain 20% indirect ownership interest in and retain management and control of Borrower and there is no change in the management and day-to-day operations at the Premises, unless otherwise approved by Lender;

2.

Lender receives notice of such transfer within thirty (30) days of the consummation of such transfer along with the organizational documents of the transferee;

3.

At Lender's option, Lender receives an acceptable background and credit check, at Borrower's cost, for the proposed transferee if said proposed transferee's interest in Borrower will equal or exceed 20%;

4.

At Lender's option, Lender receives an acceptable OFAC report (research of the Office of Foreign Assets Control "Watched" companies list), at Borrower's cost;

5.

Lender receives an organizational chart for Borrower which includes ownership breakdowns for all entity levels and is certified by Borrower as true and correct; and

6.

Lender receives payment of a processing fee of $1,000.00.

"Mezzanine Financing Requirements" are all of the following:

(i)

no Event of Default has occurred under the Loan Documents;

(ii)

the mezzanine borrower may not be Borrower;

(iii)

the mezzanine debt is used solely to reimburse the mezzanine borrower for the costs associated with the repair and/or improvement of the Premises subject to the terms and conditions of the Loan Documents;

(iv)

the combined outstanding Indebtedness on the Loan and proposed mezzanine financing does not exceed eighty percent (80%) of the

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appraised value of the Premises as calculated by Lender at the time of funding of the mezzanine financing or at Lender's option as established by an appraisal of the Premises prepared by an MAI appraiser approved by Lender and in form and substance acceptable to Lender, which appraisal shall be paid for by Borrower;

(v)

a minimum of 1.05 debt service coverage, based on a 30-year amortization schedule, is maintained.  The debt service coverage shall be the annual net cash flow (annual net operating income after deduction for tenant improvements, leasing commissions, annual replacement reserves and a management fee) divided by the total annual installment payments due under the Note secured hereby and on any proposed mezzanine financing including accrued or capitalized interest.  Only net operating income from approved executed leases in effect on the Premises with no uncured defaults shall be used in Lender's determination of the annual net cash flow;  

(vi)

the only security for the mezzanine financing is a pledge of ownership interests in Borrower or an owner of Borrower, directly or indirectly and such financing does not encumber nor result in any lien or charge upon or against the Premises or the Rents; and

(vii)

Lender's reasonable approval of the mezzanine lender as well as any successor or assign of mezzanine lender, any of which must be an institutional lender;

(viii)

Lender's reasonable approval of the mezzanine financing loan documents;

(ix)

Execution by the mezzanine lender of an inter-creditor agreement in form and substance acceptable to Lender;

(x)

neither Guarantor nor Borrower may be a guarantor of the mezzanine financing;

(xi)

at Lender's option, if required by the procedures promulgated by any rating agency(s) associated with a securitization transaction, evidence in writing to the effect that such mezzanine financing will not result in a re-qualification, reduction or withdrawal of any rating in effect immediately prior to the obtaining of the mezzanine

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financing issued in connection with the applicable securitization transaction;

(xii)

Borrower pays to Lender a reasonable fee for the handling and processing of such financing and reimburses Lender for all costs and expenses incurred by Lender, including but not limited to outside counsel fees and costs; and

(xiii)

the right to obtain mezzanine debt is personal to VMS National Properties and any successor borrower directly or indirectly wholly owned by AIMCO REIT and/or AIMCO OP and may not be exercised by any successor or assign of Borrower other than a successor borrower directly or indirectly wholly owned by AIMCO REIT and/or AIMCO OP.

(g)

allow all or any portion of the Premises to be operated as or converted to a cooperative or condominium form of ownership;

(h)

amend, alter, modify, terminate or assign that certain Property Management Agreement by and between Borrower, and NHPMN Management, LP dated January 1, 2003 as amended by Amendment of Management Agreement dated November 9, 2006, now in existence or any subsequent agreement hereafter entered into with respect to the Premises (the "Property Management Agreement");

(i)

permit the property and leasing manager to assign or sell the Property Management Agreement; or

(j)

replace the current property and leasing manager or Property Management Agreement without the prior consent of Lender.

3.

(a)

Borrower shall pay or cause to be paid when due and before any penalty attaches or interest accrues all general taxes, special taxes, assessments (including assessments for benefits from public works or improvements whenever begun or completed), utility charges, water charges, sewer service charges, common area maintenance charges, if any, vault or space charges and all other like charges against or affecting the Premises or against any property or equipment located on the Premises, or which might become a lien on the Premises, and shall, within 15 days following Lender's request, furnish to Lender a duplicate receipt of such payment.  If any such tax, assessment or charge may legally be paid in installments, Borrower may, at its option, pay such tax, assessment or charge in installments.  

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(b)

If Borrower desires to contest any tax, assessment or charge relating to the Premises, Borrower may do so by paying the same in full, under protest, in the manner provided by law; provided, however, that

(i)

if contest of any tax, assessment or charge may be made without the payment thereof, and

(ii)

such contest shall have the effect of preventing the collection of the tax, assessment or charge so contested and the sale or forfeiture of the Premises or any part thereof or any interest therein to satisfy the same,

then Borrower may in its discretion and upon the giving of written notice to Lender of its intended action and upon the furnishing to Lender of such security or bond as Lender may require, contest any such tax, assessment or charge in good faith and in the manner provided by law.  All costs and expenses incidental to such contest shall be paid by Borrower.  In the event of a ruling or adjudication adverse to Borrower, Borrower shall promptly pay such tax, assessment or charge.  Borrower shall indemnify and save harmless the Lender and the Premises from any loss or damage arising from any such contest and shall, if necessary to prevent sale, forfeiture or any other loss or damage to the Premises or to Lender, pay such tax, assessment or charge or take whatever action is necessary to prevent any sale, forfeiture or loss.  

4.

(a)

Borrower shall at all times keep or cause to be kept in force (i) property insurance insuring all Improvements which now are or hereafter become a part of the Premises for perils covered by a causes of loss-special form insurance policy, including coverage against terrorism and containing replacement cost, ordinance and law and agreed amount endorsements or equivalent coverage; (ii) commercial general liability insurance naming Lender as an additional insured protecting Borrower and Lender against liability for bodily injury or property damage occurring in, on or adjacent to the Premises, with a combined single limit of not less than One Million Dollars ($1,000,000) per occurrence with not less than a Two Million Dollar ($2,000,000) aggregate limit and excess umbrella liability insurance of not less than Fifteen Million Dollars ($15,000,000); (iii) boiler and machinery insurance if the property has a boiler or is an office building; (iv) rental value insurance for the perils specified herein for one hundred percent (100%) of the Rents (including operating expenses, real estate taxes, assessments and insurance costs which are lessee's liability) for a period of twelve (12) months; (v) builders risk insurance during all periods

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of construction; and (vi) insurance against all other hazards as may be reasonably required by Lender, including, without limitation, insurance against loss or damage by flood.

(b)

All insurance (including deductibles and exclusions) shall be in form, content and amounts reasonably approved by Lender and written by an insurance company or companies approved by Lender and rated A-, class size VIII or better in the most current issue of Best's Insurance Reports and which is licensed to do business in the state in which the Premises are located or a governmental agency or instrumentality approved by Lender.  The policies for such insurance shall have attached thereto standard mortgagee clauses in favor of and permitting Lender to collect any and all proceeds payable thereunder and shall include a 30 day (except for nonpayment of premium, in which case, a 10 day) notice of cancellation clause in favor of Lender.  All certificates of insurance (or duplicate originals of policies if requested by Lender) shall be delivered to and held by Lender as further security for the payment of the Note and any other ob ligations arising under the Loan Documents, with evidence of renewal coverage delivered to Lender at least 30 days before the expiration date of any policy.  Borrower shall not carry or permit to be carried separate insurance, concurrent in kind or form and contributing in the event of loss, with any insurance required in the Loan Documents.

5.

(a)

Upon the occurrence of an Event of Default, Borrower shall deposit with and pay to Lender, on each payment date specified in the Note, sums calculated by Lender for payment of the following as they become due and payable:  (i) the estimated taxes and assessments assessed or levied against the Premises, and (ii) the estimated premiums for insurance required by the Loan Documents, excluding commercial general liability insurance.  Lender shall use such deposits to pay the taxes, assessments and premiums when the same become due.  Borrower shall procure and deliver to Lender, in advance, statements for such charges.  If the total payments made by Borrower under this paragraph exceed the amount of payments actually made by Lender for taxes, assessments and insurance premiums, such excess shall be credited by Lender on subsequent deposits to be made by Borrower.  If, however, the deposits are insufficient to pay t he taxes, assessments and insurance premiums when the same shall be due and payable, Borrower will pay to Lender any amount necessary to make up the deficiency, five (5) business days before the date when payment of such taxes, assessments and insurance premiums shall be due.  If at any time Borrower shall tender to Lender, in accordance with the provisions of the Note secured by this Deed of Trust, full payment of the entire Indebtedness represented thereby, Lender shall, in computing the amount

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of such Indebtedness, credit to the account of Borrower any balance remaining in the funds accumulated and held by Lender under the provisions of this paragraph.  If there is an Event of Default resulting in a public sale of the Premises, or if Lender otherwise acquires the Premises after an Event of Default, Lender shall apply, at the time of commencement of such proceedings, or at the time the Premises is otherwise acquired, the balance then remaining in the funds accumulated under this paragraph as a credit toward any delinquent or accrued taxes and then in such priority as Lender elects to the other Indebtedness.

(b)

Any funds held under this paragraph shall not constitute any deposit or account of the Borrower or moneys to which the Borrower is entitled upon demand, or upon the mere passage of time.  Lender shall not be required to segregate such deposits and may hold such deposits in its general account or any other account and may commingle such deposits with any other moneys of Lender or moneys which Lender is holding on behalf of any other person or entity.

6.

In the event of any damage to or destruction of the Premises, or any part thereof:

(a)

Borrower will immediately notify Lender thereof in the manner provided in this Deed of Trust for the giving of notices.  Lender shall have the right (which may be waived by Lender in writing) to settle and adjust any claim under such insurance policies required to be maintained by Borrower.  In all circumstances, the proceeds thereof shall be paid to Lender and Lender is authorized to collect and to give receipts therefor.  Borrower agrees and acknowledges that such proceeds shall be held by Lender without any allowance of interest and that in any bankruptcy proceeding of Borrower, all such proceeds shall be deemed to be "Cash Collateral" as that term is defined in Section 363 of the Bankruptcy Code.  Provided that no Event of Default exists, Borrower shall have the right to participate in any settlement or adjustment; provided, however, that any settlement or adjustment where the aggregate amount of suc h proceeds equals or exceeds $500,000 shall be subject to the written approval of Lender, not to be unreasonably withheld.

(b)

Such proceeds, after deducting therefrom any reasonable expenses incurred by Lender in the collection thereof (including but not limited to reasonable attorneys' fees and costs), shall be applied by Lender to pay the Indebtedness secured hereby including, but not limited to the Make Whole Premium, whether or not then due and payable, provided, however, that if no Event of Default exists at the time of such application or the application occurs during the Open Period, no Make Whole Premium shall be due.

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Notwithstanding anything hereinabove to the contrary,

(i)

in the event the casualty occurs more than three (3) months prior to the Maturity Date and no Event of Default exists, Lender shall apply such proceeds as follows outlined below; provided, further, that Lender's rights in this subparagraph are subject to Borrower's rights to use such proceeds for rebuilding and restoring the buildings and improvements as may be required or permitted by law in effect at the time of the loss:

(A)

If the aggregate amount of such proceeds is less than $500,000, Lender shall pay such proceeds directly to Borrower, to be held in trust for Lender and applied to the cost of rebuilding and restoring the Premises.

(B)

If the aggregate amount of such proceeds equals or exceeds $500,000 Lender shall disburse such amounts of the proceeds as Lender reasonably deems necessary for the repair or replacement of the Premises, subject to the conditions set forth in 6(c) below.

(ii)

in the event (x) an Event of Default exists, or (y) the casualty occurs during the last three (3) months prior to the Maturity Date and Lender determines that the repair and restoration of such casualty cannot be completed prior to the Maturity Date, or (z) the conditions set forth in 6(c) are not met, then Lender, in its sole and absolute discretion may either:

(A)

declare the entire Indebtedness to be immediately due and payable, provided, however, that if no Event of Default exists or the loan term is in the Open Period, no Make Whole Premium shall be due.  All proceeds shall be applied toward payment of the Indebtedness in such priority as Lender elects; or

(B)

disburse such proceeds as Lender reasonably deems necessary for the repair or replacement of the Premises subject to those conditions set forth in 6(c) which Lender in its sole and absolute discretion may require.

(c)

(i)

In the event that Borrower is to be reimbursed out of the insurance proceeds or out of any award or payment received with respect to a

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Taking, Lender shall from time to time make available such proceeds, subject to the following conditions: (a) there continues to exist no Event of Default; (b) the delivery to Lender of satisfactory evidence of the estimated cost of completion of such repair and restoration work and any architect's certificates, waivers of lien, contractor's sworn statements, and other evidence of cost and of payment and of the continued priority of the lien hereof over any potential liens of mechanics and materialmen (including, without limitation, title policy endorsements) as Lender may reasonably require and approve; (c) the time required to complete the repair and restoration work and for the income from the Premises to return to the level it was prior to the loss will not exceed the coverage period of the rental value insurance required hereunder; (d) the annual net operating income shall equal or exceed 1.20 times the annual debt service on th e Note.  Only net operating income from approved executed Leases in effect on the Premises, with no uncured defaults, shall be used in Lender's determination of the annual net operating income; (e) Lender approves the plans and specifications of such work before such work is commenced if the estimated cost of rebuilding and restoration exceeds 25% of the Indebtedness or involves any structural changes or modifications, which approval shall not be unreasonably withheld; (f) if the amount of any insurance proceeds, award or other payment is insufficient to cover the cost of restoring and rebuilding the Premises, Borrower shall pay such cost in excess of such proceeds, award or other payment before being entitled to reimbursement out of such funds; (g) Borrower pays to Lender a non-refundable processing fee equal to the greater of $5,000.00 or .25% of the amount of such proceeds within sixty (60) days of the occurrence of any such damage or destruction and before Lender disburses any proceeds; and (h) such other conditions to such disbursements, in Lender's reasonable discretion, as would be customarily required by a construction lender doing business in the area where the Premises is located or which are otherwise required by any rating agency rating a securitization transaction with respect to the Loan.

(ii)

No payment made by Lender prior to the final completion of the repair or restoration work shall, together with all payments theretofore made, exceed 90% of the cost of such work performed to the time of payment, and at all times the undisbursed balance of said proceeds shall be at least sufficient to pay for the cost of completion of such work free and clear of all liens.  Any proceeds remaining after payment of the cost of rebuilding and restoration

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shall be paid to Borrower so long as no Event of Default has occurred and is continuing.

(iii)

Repair and restoration of the Premises shall be commenced promptly after the occurrence of the loss and shall be prosecuted to completion diligently, and the Premises shall be so restored and rebuilt to substantially the same character and quality as prior to such damage and destruction and shall comply with all Legal Requirements.

(d)

Should such damage or destruction occur after foreclosure or sale proceedings have been instituted, the proceeds of any such insurance policy or policies, if not applied in rebuilding or restoration of the Improvements, shall be used to pay (i) the Indebtedness then due and owing in the event of a non-judicial sale in such priority as Lender elects, or (ii) the amount due in accordance with any decree of foreclosure or deficiency judgment that may be entered in connection with such proceedings, and the balance, if any, shall be paid to the owner of the equity of redemption if it shall then be entitled to the same, or otherwise as any court having jurisdiction may direct.

7.

In the event of the commencement of a Taking affecting the Premises:

(a)

Borrower shall notify Lender thereof in the manner provided in this Deed of Trust for the giving of notices.  Lender may participate in such proceeding, and Borrower shall deliver to Lender all documents requested by it to permit such participation.

(b)

Borrower shall cause the proceeds of any award or other payment made relating to a Taking, to be paid directly to Lender.  Lender, in its sole and absolute discretion: (i) may apply all such proceeds to pay the Indebtedness in such priority as Lender elects, provided however, that if no Event of Default exists at the time of such application no Make Whole Premium shall be due; or (ii) subject to and in accordance with the provisions set forth in paragraph 6(c) above, may disburse such amounts of the proceeds as Lender reasonably deems necessary for the repair or replacement of the Premises.

Notwithstanding anything herein above to the contrary, provided no Event of Default exists, Lender agrees to disburse the proceeds received from any Inconsequential Taking, as hereinafter defined, to Borrower for the repair and/or replacement of the Premises.  An Inconsequential Taking shall be a Taking which (i) results in less than $100,000 in proceeds; (ii) does not, in Lender's

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determination, materially or adversely affect the Improvements, parking, access, ingress, egress or use of the Premises; and (iii) does not trigger any rights or options of tenants under the Leases.   

8.

If by the laws of the United States of America or of any state or governmental subdivision having jurisdiction over Borrower or of the Premises or of the Loan evidenced by the Loan Documents or any amendments or modifications thereof, any tax or fee is due or becomes due or is imposed upon Lender in respect of the issuance of the Note hereby secured or the making, recording and registration of this Deed of Trust or otherwise in connection with the Loan Documents, the Environmental Indemnity or the Loan, except for Lender's income or franchise tax, Borrower covenants and agrees to pay such tax or fee in the manner required by such law, and to hold harmless and indemnify Trustee and Lender, their successors and assigns, against any liability incurred by reason of the imposition of any such tax or fee.  

9.

(a)

Upon the occurrence of any Event of Default, Lender may, but need not, make any payment or perform any act herein required of Borrower, in any form and manner deemed expedient and may, but need not, make full or partial payments of principal or interest on prior encumbrances, if any, and purchase, discharge, compromise or settle any tax lien or other prior lien or title or claim thereof, or redeem from any tax sale or forfeiture affecting said Premises, or contest any tax or assessment.  All moneys paid for any of the purposes herein authorized and all reasonable expenses paid or incurred in connection therewith, including but not limited to, reasonable attorneys' fees and costs and reasonable attorneys' fees and costs on appeal, and any other money advanced by Lender to protect the Premises and the lien hereof, shall be so much additional Indebtedness secured hereby and shall become immediately due and payable without notice an d with interest thereon at the Default Rate from the date of expenditure or advance until paid.  

(b)

In making any payment hereby authorized relating to taxes or assessments or for the purchase, discharge, compromise or settlement of any prior lien, Lender may make such payment according to any bill, statement or estimate secured from the appropriate public office without inquiry into the accuracy thereof or into the validity of any tax, assessment, sale, forfeiture, tax lien or title or claim thereof or without inquiry as to the validity or amount of any claim for lien which may be asserted.  

10.

If one or more of the following events (herein called an "Event of Default" or "Events of Default" as the context so requires) shall have occurred:  

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(a)

failure to pay when due any principal, interest, Make Whole Premium or other Indebtedness, utilities, taxes or assessments or insurance premiums required pursuant to the Loan Documents or the Environmental Indemnity, and such failure shall have continued for 5 days; or

(b)

Borrower, Interest Owner or any guarantor voluntarily brings or acquiesces to any of the following:  (A) any action for dissolution, act of dissolution or dissolution or the like of Borrower, Interest Owner or any guarantor under the Federal Bankruptcy Code as now or hereafter constituted; (B) the filing of a petition or answer proposing the adjudication of Borrower, Interest Owner or any guarantor as a bankrupt or its reorganization or arrangement, or any composition, readjustment, liquidation, dissolution or similar relief with respect to it pursuant to any present or future federal or state bankruptcy or similar law; or (C) the appointment by order of a court of competent jurisdiction of a receiver, trustee or liquidator of the Premises or any part thereof or of Borrower, Interest Owner or any guarantor or of substantially all of the assets of Borrower, Interest Owner or any guarantor; or

(c)

one or more of the items set forth in paragraph 10(b) above occur which were either not (i) voluntarily brought by Borrower, Interest Owner or any guarantor or (ii) acquiesced in by Borrower, Interest Owner or any guarantor, and which are not discharged or dismissed within 90 days after the action, filing or appointment, as the case may be; or

With respect to the matters in (b) and (c) above for an Interest Owner only, no Event of Default shall occur until an interested party or Interest Owner asserts a claim or right against Borrower or the Premises which delays or otherwise affects Lender's rights, remedies, or interests granted under the Loan Documents (whether or not such assertion is successful).

(d)

with respect to the matters not described in the other subparagraphs of this paragraph 10, failure to duly observe or perform any covenant, condition or agreement of the Borrower or any guarantor contained in this Deed of Trust, the Guaranty, the Note or the Assignment of Leases from Borrower to Lender or in any other instrument or agreement which evidences or secures the Loan (the "Loan Documents"), but excluding the Environmental Indemnity or in the Environmental Indemnity, and such failure shall have continued for 30 days after Notice specifying such failure is given by Lender to Borrower; or

If any failure to observe or perform under (d) above shall be of such nature that it cannot be cured or remedied within 30 days, Borrower shall be

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entitled to a reasonable period of time to cure or remedy such failure (not to exceed 90 days following the giving of Notice), provided Borrower commences the cure or remedy thereof within the 30 day period following the giving of Notice and thereafter proceeds with diligence, as determined by Lender, to complete such cure or remedy.  

With respect to the matters in (d), no Event of Default shall occur if the failure to observe or perform will not have a Material Adverse Effect as such term is defined below.

"Material Adverse Effect" means a material adverse effect upon (i) the business or the financial position or results of operation of Borrower, (ii) the ability of Borrower to perform, or of Lender to enforce, any of the Loan Documents or Environmental Indemnity or (iii) the value of (x) the Collateral taken as a whole or (y) the Premises.

(e)

the failure of Borrower to duly observe or perform any of the covenants, conditions and agreements of the Borrower contained in paragraph 2(f) of this Deed of Trust and to cure such failure within ten (10) days following Borrower’s receipt of Notice of such failure; provided, however, that Borrower shall only be granted said 10 day cure period if the failure to observe or perform is a curable event and the granting of said cure period will not have a Material Adverse Effect; or

(f)

any representation when made by or on behalf of Borrower, Interest Owner or any guarantor regarding the Premises, the making or delivery of any of the Loan Documents or the Environmental Indemnity or in any material written information provided by or on behalf of Borrower, Interest Owner or any guarantor in connection with the Loan shall prove to be untrue or inaccurate in any material respect; or

(g)

the failure of Borrower to give Notice to Lender within 90 days after the death of any individual who is personally liable for any obligation under the Loan Documents or the Environmental Indemnity, as Borrower, indemnitor or guarantor, whether or not such individual had executed the Note or this Deed of Trust; or

(h)

subject to the provisions of paragraph 2(f), the failure of Borrower to provide Lender with an assumption agreement in form and substance and executed by a person(s) or entity(ies) acceptable to Lender in its sole discretion to assume the obligations of any deceased individual who is personally liable for any obligation under the Loan Documents or the Environmental Indemnity, as Borrower, indemnitor or guarantor, whether

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or not such individual had executed the Note or this Deed of Trust, and such failure shall have continued for 90 days after the death of such individual;

(i)

all or any portion of the Premises is operated as or converted to a cooperative or condominium form of ownership; or

then, in each and every such case, the whole of said principal sum hereby secured shall, at the option of the Lender and without further notice to Borrower, become immediately due and payable together with accrued interest thereon, a Make Whole Premium calculated in accordance with the provisions of the Loan Documents and all other Indebtedness, and whether or not Lender has exercised said option, interest shall accrue on the entire principal balance and any interest or Make Whole Premium or other Indebtedness then due, at the Default Rate until fully paid or if Lender has not exercised said option, for the duration of any Event of Default.  

11.

Borrower agrees that if Lender accelerates the whole or any part of the principal sum hereby secured after the occurrence of an Event of Default but outside of the Open Periods, that Borrower shall pay as yield maintenance protection and not as a penalty, a "Make Whole Premium", as defined in the Note.

12.

(a)

Upon the occurrence of any Event of Default, in addition to any other rights or remedies provided in the Loan Documents, at law, in equity or otherwise, Lender shall have the right to cause the Premises or any part thereof to be sold in order to accomplish the object of these trusts and upon demand by Lender, Trustee, without demand on Borrower, shall sell the Premises or such part thereof as Trustee in its sole discretion may deem necessary to accomplish the objects of these trusts having first given notice of the time and place of such sale as required by law for the sale of real property upon execution.

(b)

Trustee may postpone such sale from time to time by giving notice of such postponement in the same manner in which any original notice of sale was given or by an announcement or proclamation made to the persons assembled at the time and place previously appointed and noticed for such sale or postponed sale, and on the date of such sale or the date to which such sale may have been postponed Trustee may sell the Premises to the highest bidder.  Lender or its agents may bid and purchase at such sale.  Trustee in conducting said sale may act either in person or through the agency of an auctioneer and may establish as one of the conditions of such sale that all bids and payments for said Premises be made in cash.

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13.

Upon such sale, Trustee shall make, execute, and after due payment is made, deliver to the purchaser or purchasers a deed or deeds for the Premises or part thereof sold and shall apply the proceeds of the sale, at the election of Lender first, to all of the expenses of such sale including the reasonable expenses of this trust or the Trustee and the fees and costs of any attorneys for this trust, environmental audits, the Trustee or Lender, all of which shall accrue and become due from and after any Event of Default, together with any sums which Trustee or Lender shall have paid for procuring any abstract, certificate or report of title to the Premises and, second, to principal, interest and any other Indebtedness and all other sums or amounts due under the Note or agreed or provided to be paid by Borrower herein or in any other Loan Documents, all in such order as Lender may determine.  The remainder of such proceeds, if any, sha ll be paid to Borrower or Borrower's successors or assigns, as their rights may appear.  

14.

In the event of such a sale of the Premises or any part thereof and the execution of a deed or deeds therefor under these trusts, any recital therein of the occurrence of an Event of Default or of the giving or recording of any notice or demand by Trustee or Lender regarding such sale shall be conclusive proof thereof, and the receipt of the purchase money recited therein shall fully discharge the purchaser from any obligation for the proper application of the proceeds of sale in accordance with these trusts.

15.

Following the occurrence of an Event of Default, unless the same has been specifically waived in writing, Borrower shall forthwith upon demand of Trustee or Lender surrender to Lender possession of the Premises, and Lender shall be entitled to take actual possession of the Premises or any part thereof personally or by its agents or attorneys, and Lender in its discretion may, with or without force and with or without process of law, enter upon and take and maintain possession of all or any part of the Premises together with all documents, books, records, papers and accounts of the Borrower or the then owner of the Premises relating thereto, and may exclude Borrower, its agents or assigns wholly therefrom, and may as attorney-in-fact or agent of the Borrower, or in its own name as Lender and under the powers herein granted:

(a)

hold, operate, maintain, repair, rebuild, replace, alter, improve, manage or control the Premises as it deems judicious, insure and reinsure the same and any risks related to Lender's possession, operation and management thereof and receive all Rents, either personally or by its agents, and with full power to use such measures, legal or equitable, as in its discretion it deems proper or necessary to enforce the payment or security of the Rents, including actions for the recovery of Rent, actions in forcible detainer and actions in distress for Rents, hereby granting full power and authority to

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exercise each and every of the rights, privileges and powers herein granted at any and all times hereafter, without notice to Borrower; and

(b)

conduct leasing activity pursuant to the provisions of the Assignment of Leases.

Neither Trustee nor Lender shall be obligated to perform or discharge, nor does either hereby undertake to perform or discharge, any obligation, duty or liability under any Lease.  Except to the extent that the same is caused solely by Lender's gross negligence or willful misconduct, should Trustee or Lender incur any liability, loss or damage under any Leases, or under or by reason of the Assignment of Leases, or in the defense of any claims or demands whatsoever which may be asserted against Lender or Trustee by reason of any alleged obligations or undertakings on its part to perform or discharge any of the terms, covenants or agreements in any Lease, the amount thereof, including costs, expenses and reasonable attorneys' fees and costs, including reasonable attorneys' fees and costs on appeal, shall be added to the Indebtedness and secured hereby.

16.

Upon the occurrence of an Event of Default, Trustee and Lender in the exercise of the rights and powers conferred upon them shall have the full power to use and apply the Rents, less costs and expenses of collection to the payment of or on account of the items listed in (a) - (c) below, at the election of Lender and in such order as Lender may determine as follows:

(a)

to the payment of (i) the expenses of operating and maintaining the Premises, including, but not limited to the cost of management, leasing (which shall include reasonable compensation to Trustee, Lender and their respective agent or agents if management and/or leasing is delegated to an agent or agents), repairing, rebuilding, replacing, altering and improving the Premises, (ii) premiums on insurance as hereinabove authorized, (iii) taxes and special assessments now due or which may hereafter become due on the Premises, and (iv) expenses of placing the Premises in such condition as will, in the sole judgment of Lender, make it readily rentable;

(b)

to the payment of any principal, interest or any other Indebtedness secured hereby or any deficiency which may result from any foreclosure sale;

(c)

to the payment of established claims for damages, if any, reasonable attorneys' fees and costs and reasonable attorneys' fees and costs on appeal.

The manner of the application of Rents, the reasonableness of the costs and charges to which such Rents are applied and the item or items which shall be credited thereby shall be within the sole and unlimited discretion of Lender.  To the extent

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that the costs and expenses in (a) and (c) above exceed the amounts collected, the excess shall be added to the Indebtedness and secured hereby.

17.

Upon the occurrence of any Event of Default, unless the same has been specifically waived in writing, Lender may apply to any court having jurisdiction for the appointment of a receiver of the Premises.  Such appointment may be made either before or after sale, without notice, without regard to the solvency or insolvency of Borrower at the time of application for such receiver and without regard to the then value of the Premises or the adequacy of Lender's security.  Lender may be appointed as such receiver.  The receiver shall have power to collect the Rents during the pendency of any foreclosure proceedings and, in case of a sale, during the full statutory period of redemption, if any, as well as during any further times when Borrower, except for the intervention of such receiver, would be entitled to collect such Rents.  In addition, the receiver shall have all other powers which shall be necessary or are usual in such cases for the protection, possession, control, management and operation of the Premises during the whole of said period.  The court from time to time may authorize the receiver to apply the net income in its possession at Lender's election and in such order as Lender may determine in payment in full or in part of those items listed in paragraph 16.

18.

(a)

Borrower agrees that all reasonable costs, charges and expenses, including but not limited to, reasonable attorneys' fees and costs, incurred or expended by Trustee or Lender arising out of or in connection with any action, proceeding or hearing, legal, equitable or quasi-legal, including the preparation therefor and any appeal therefrom, in any way affecting or pertaining to the Loan Documents, the Environmental Indemnity, or the Premises, shall be promptly paid by Borrower.  All such sums not promptly paid by Borrower shall bear interest at the Default Rate from the date of such advance and shall be due and payable on demand and, except for sums relating to the Environmental Indemnity, shall be added to the Indebtedness secured hereby.

(b)

Borrower hereby agrees that upon the occurrence of an Event of Default and the acceleration of the principal sum secured hereby pursuant to this Deed of Trust, to the full extent that such rights can be lawfully waived, Borrower hereby waives and agrees not to insist upon, plead, or in any manner take advantage of, any notice of acceleration, any stay, extension, exemption, homestead, marshaling or moratorium law or any law providing for the valuation or appraisement of all or any part of the Premises prior to any sale or sales thereof under any provision of this Deed of Trust or before or after any decree, judgment or order of any court or confirmation thereof, or claim or exercise any right to redeem all or any

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part of the Premises so sold and hereby expressly waives to the full extent permitted by applicable law on behalf of itself and each and every person or entity acquiring any right, title or interest in or to all or any part of the Premises, all benefit and advantage of any such laws which would otherwise be available to Borrower or any such person or entity, and agrees that neither Borrower nor any such person or entity will invoke or utilize any such law to otherwise hinder, delay or impede the exercise of any remedy granted or delegated to Lender herein but will permit the exercise of such remedy as though any such laws had not been enacted.  Borrower hereby further expressly waives to the full extent permitted by applicable law on behalf of itself and each and every person or entity acquiring any right, title or interest in or to all or any part of the Premises any and all rights of redemption from any sale or any order or de cree of foreclosure obtained pursuant to provisions of this Deed of Trust.

19.

In accordance with and subject to the terms and conditions of the Assignment of Leases, Borrower hereby assigns to Lender directly and absolutely, and not merely collaterally, the interest of Borrower as lessor under the Leases of the Premises, and the Rents payable under any Lease and/or with respect to the use of the Premises, or portion thereof, including any oil, gas or mineral lease, or any installments of money payable pursuant to any agreement or any sale of the Premises or any part thereof, subject only to a license, if any, granted by Lender to Borrower with respect thereto prior to the occurrence of an Event of Default.  Borrower has executed and delivered the Assignment of Leases which grants to Lender specific rights and remedies in respect of said Leases and governs the collection of Rents thereunder and from the use of the Premises, and such rights and remedies so granted shall be cumulative of those granted herein.  

The collection of such Rents and the application thereof as aforesaid shall not cure or waive any Event of Default or notice of default hereunder or invalidate any act done pursuant to such notice, except to the extent any such Event of Default is fully cured.  Failure or discontinuance of Lender at any time, or from time to time, to collect any such moneys shall not impair in any manner the subsequent enforcement by Lender of the right, power and authority herein conferred on Lender.  Nothing contained herein, including the exercise of any right, power or authority herein granted to Lender, shall be, or be construed to be, an affirmation by Lender of any tenancy, Lease or option, or right to possession otherwise, or an assumption of liability under, or the subordination of the lien or charge of this Deed of Trust to any such tenancy, Lease or option or right to possession otherwise.  Borrower hereby agrees that, in the event Lender exercises its rights as provided for in this paragraph or in the Assignment of Leases, Borrower waives any right to compensation for the use of Borrower's furniture, furnishings or equipment in the Premises for the period such assignment of rents or receivership

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is in effect, it being understood that the Rents derived from the use of any such items shall be applied to Borrower's obligations hereunder as above provided.  

20.

All rights and remedies granted to Trustee or Lender in the Loan Documents shall be in addition to and not in limitation of any rights and remedies to which it is entitled in equity, at law or by statute, and the invalidity of any right or remedy herein provided by reason of its conflict with applicable law or statute shall not affect any other valid right or remedy afforded to Trustee or Lender.  No waiver of any default or Event of Default under any of the Loan Documents shall at any time thereafter be held to be a waiver of any rights of the Trustee or Lender hereunder, nor shall any waiver of a prior Event of Default or default operate to waive any subsequent Event of Default or default.  All remedies provided for in the Loan Documents are cumulative and may, at the election of Lender, be exercised alternatively, successively or concurrently.  No act of Trustee or Lender shall be construed as an election to proceed under any one provision herein to the exclusion of any other provision or to proceed against one portion of the Premises to the exclusion of any other portion.  Time is of the essence under this Deed of Trust and the Loan Documents.

21.

By accepting payment of any sum secured hereby after its due date, Lender does not waive its right either to require prompt payment when due of all other sums or installments so secured or to declare a default for failure to pay such other sums or installments.

22.

The usury provisions of paragraph 6 of the Note and the liability provisions of paragraph 9 of the Note are fully incorporated herein by reference as if the same were specifically stated here.

23.

In the event one or more provisions of the Loan Documents shall be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision hereof, and the Loan Documents shall be construed as if any such provision had never been contained herein.  

24.

If the payment of the Indebtedness secured hereby or of any part thereof shall be extended or varied, or if any part of the security be released, all persons now or at any time hereafter liable therefor, or interested in said Premises, shall be held to assent to such extension, variation or release, and their liability and the lien and all provisions hereof shall continue in full force, the right of recourse against all such persons being expressly reserved by Lender notwithstanding such variation or release.  

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25.

Upon payment in full of the principal sum, interest and other Indebtedness secured by the Loan Documents, these presents shall be null and void, and Trustee shall release this Deed of Trust and the lien hereof by proper instrument executed in recordable form.  

26.

(a)

Borrower hereby grants to Lender and its respective agents, attorneys, employees, consultants, contractors and assigns an irrevocable license and authorization to enter upon and inspect the Premises and all facilities located thereon at reasonable times.

(b)

In connection with any sale or conveyance of this Deed of Trust, Borrower grants to Lender and its respective agents, attorneys, employees, consultants, contractors and assigns an irrevocable license and authorization to conduct, at Lender's expense, a Phase I environmental audit of the Premises.

(c)

In the event there has been an Event of Default or in the event Lender has formed a reasonable belief, based on its inspection of the Premises or other factors known to it, that Hazardous Materials may be present on the Premises, then Borrower grants to Lender and its respective agents, attorneys, employees, consultants, contractors and assigns an irrevocable license and authorization to conduct environmental tests of the Premises, including without limitation, a Phase I environmental audit, subsurface testing, soil and ground water testing, and other tests which may physically invade the Premises or facilities (the "Tests").  The scope of the Tests shall be such as Lender, in its sole but reasonable discretion, determines is necessary to (i) investigate the condition of the Premises, (ii) protect the security interests created under this Deed of Trust, or (iii) determine compliance with Environmental Laws, the provisions of the Loan Documents and the Environmental Indemnity and other matters relating thereto.  Borrower shall pay the reasonable costs of the Tests and upon Borrower’s request, Lender will make available to Borrower the result of the Tests.

(d)

Provided no Event of Default has occurred, Lender will provide Borrower with reasonable notice of Lender's intent to enter, inspect and conduct the Tests provided for in this paragraph.  In addition, Lender shall conduct such inspections and Tests during normal business hours and use reasonable efforts to minimize disruption of lessees' business operations.

The foregoing licenses and authorizations are intended to be a means of protection of Lender's security interest in the Premises and not as participation in the management of the Premises.

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27.

Within 15 days after any written request by any party to this Deed of Trust, the requested party shall certify, by a written statement duly acknowledged, the amount of principal, interest and other Indebtedness then owing on the Note, the terms of payment, Maturity Date and the date to which interest has been paid.  Borrower shall further certify whether any defaults, offsets or defenses exist against the Indebtedness secured hereby.  

28.

(a)

Borrower shall furnish to Lender within 120 days after the end of each fiscal year of Borrower, a statement of income and expenses for Borrower’s operation of the Premises for that fiscal year, a statement of changes in financial position of Borrower relating to the Premises for that fiscal year and, when requested by Lender, a balance sheet showing all assets and liabilities of Borrower relating to the Premises as of the end of that fiscal year;

(b)

Borrower shall furnish to Lender within 120 days after the end of each fiscal year of Borrower, and at any other time upon Lender’s request, a rent schedule for the Premises showing the name of each tenant, and for each tenant, the space occupied, the lease expiration date, the rent payable for the current month, the date through which rent has been paid, and any related information requested by Lender;

(c)

Borrower shall furnish to Lender within 120 days after the end of each fiscal year of Borrower, and at any other time upon Lender’s request, an accounting of all security deposits held pursuant to all Leases, including the name of the institution (if any) and the names and identification numbers of the accounts (if any) in which such security deposits are held and the name of the person to contact at such financial institution, along with any authority or release necessary for Lender to access information regarding such accounts;

(d)

upon Lender’s request, a balance sheet, a statement of income and expenses for Borrower, a statement of changes in financial position of Borrower for Borrower’s most recent fiscal year, an aged account receivables report and an annual budget; and

(e)

if required by Lender, a statement of income and expense for the Premises for the prior month or quarter.

(f)

Each of the statements, schedules and reports required by Section 28 shall be certified to be complete and accurate by an individual having authority to bind Borrower, and shall be in such form and contain such detail as

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Lender may reasonably required.  If an Event of Default has occurred and is continuing, Lender may require that the financial statements required by Sections 28(a), 28(b) and 28(c) be audited, but may not require that any other financial statements required by Section 28 be audited.  Certification of a statement by the chief financial officer of the entity that is the subject of the statement or, in the case of a partnership, the chief financial officer of the general partner, will be acceptable to Lender as certification by an individual having authority to bind Borrower.

29.

Each notice, consent, request, report or other communication under this Deed of Trust or any other Loan Document (each a "Notice") which any party hereto may desire or be required to give to the other shall be deemed to be an adequate and sufficient notice if given in writing and service is made by either (i) registered or certified mail, postage prepaid, in which case notice shall be deemed to have been received three (3) business days following deposit to U.S. mail; or (ii) nationally recognized overnight air courier, next day delivery, prepaid, in which case such notice shall be deemed to have been received one (1) business day following delivery to such nationally recognized overnight air courier.  All Notices shall be addressed to Borrower at its address given on the first page hereof, or to Lender at c/o Principal Real Estate Investors, LLC, 801 Grand Avenue, Des Moines, Iowa 50392-1450, Attn:  Commerc ial Real Estate Servicing, Loan No. 755504, or to such other place as any party may by written notice to the other parties hereafter designate as a place for service of notice.  Borrower shall not be permitted to designate more than one place for service of Notice concurrently.

30.

Lender, from time to time, may substitute another Trustee in place of the Trustee named herein, to execute the trusts hereby created; and upon such appointment, and without conveyance to the successor trustee, the successor trustee shall be vested with all the title, interest, powers, duties and trusts in the Premises hereby vested in or conferred upon Trustee herein named.  Each such appointment and substitution shall be made by written instrument executed by the Lender containing reference to this Deed of Trust sufficient to identify it, which instrument, when recorded in the office of the County Recorder of the county or counties in which the Premises is situated, shall be conclusive proof of proper appointment of the successor trustee.  The recital or statement, in any instrument executed by Trustee in pursuance of any of said trusts, of the due authorization of any agent of the Trustee executing the same shall for all p urposes be conclusive proof of such authorization.  

31.

Trustee at any time, at Trustee's option, may commence and maintain suit in any court of competent jurisdiction and obtain the aid and direction of said court in the execution by it of the trusts or any of them, herein expressed or contained, and, in such suit, may obtain the orders or decrees, interlocutory or final of said court

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directing the execution of said trusts, and confirming and approving Trustee's acts, or any of them, or any sales or conveyances made by Trustee, and adjudging the validity thereof, and directing that the purchasers of the property sold and conveyed be let into immediate possession thereof, and providing for orders of court or other process requiring the Sheriff of the county in which said property is situated to place and maintain said purchasers in quiet and peaceable possession of the property so purchased by them, and the whole thereof.  

32.

Borrower has had the opportunity to fully negotiate the terms hereof and modify the draftsmanship of the Loan Documents and the Environmental Indemnity.  Therefore, the terms of the Loan Documents and the Environmental Indemnity shall be construed and interpreted without any presumption, inference, or rule requiring construction or interpretation of any provision of the Loan Documents and the Environmental Indemnity against the interest of the party causing the Loan Documents and the Environmental Indemnity or any portion of it to be drafted.  Borrower is entering into the Loan Documents and the Environmental Indemnity freely and voluntarily without any duress, economic or otherwise.

33.

Borrower, forthwith upon request, at any and all times hereafter, at the expense of Borrower, will cause to be made, executed, acknowledged and delivered to Trustee, any and every deed or assurance in law which Trustee or counsel of Trustee shall reasonably advise or require for the more sure, effectual and satisfactory granting and confirming of said Premises unto Trustee.  

34.

Trustee shall not be liable or responsible for its acts or omissions hereunder, except for Trustee's own gross negligence or willful default, or be liable or responsible for any acts or omissions of any agent, attorneys or employee by him employed hereunder, if selected with reasonable care.  

35.

Trustee accepts this trust when this Deed of Trust executed and acknowledged is made a public record as provided by law.  Trustee is not obligated to notify any party hereto of pending sale under any other deed of trust or of any action or proceeding in which Borrower, Lender, or Trustee shall be a party unless brought by Trustee.  

36.

This Deed of Trust and all provisions hereof shall inure to the benefit of the heirs, successors and assigns of Lender and shall bind the heirs and permitted successors and assigns of Borrower.  

37.

This Deed of Trust shall be governed by, and construed in accordance with, the laws of the state of California, without regard to its conflicts of law principles.

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38.

As used herein, the term "Default Rate" means a rate equal to the lesser of (i) four percent (4%) per annum above the then applicable interest rate payable under the Note or (ii) the maximum rate allowed by applicable law.

39.

BORROWER AND LENDER EACH KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE, TO THE EXTENT PERMITTED BY LAW, TRIAL BY JURY IN ANY ACTIONS BROUGHT BY BORROWER, TRUSTEE OR LENDER IN CONNECTION WITH THIS DEED OF TRUST, ANY OF THE LOAN DOCUMENTS, THE INDEBTEDNESS SECURED HEREBY, OR ANY OTHER STATEMENTS OR ACTIONS OF LENDER.

40.

This Deed of Trust and the Indebtedness secured hereby is for the sole purpose of conducting or acquiring a lawful business, professional or commercial activity or for the acquisition or management of real or personal property as a commercial investment, and all proceeds of such Indebtedness shall be used for said business or commercial investment purpose.  Such proceeds will not be used for the purchase of any security within the meaning of the Securities Exchange Act of 1934, as amended, or any regulation issued pursuant thereto, including without limitation, Regulations U, T and X of the Board of Governors of the Federal Reserve System.  This is not a purchase money deed of trust where a seller is providing financing to a buyer for the payment of all or any portion of the purchase price, and the Premises secured hereby is not a residence or homestead or used for mining, grazing, agricultural, timber or farming purposes.

41.

Unless Lender shall otherwise direct in writing, Borrower shall appear in and defend all actions or proceedings purporting to affect the security hereunder, or any right or power of the Lender.  The Lender shall have the right to appear in such actions or proceedings.  Borrower shall save Lender harmless from all reasonable costs and expenses, including but not limited to, reasonable attorneys' fees and costs, and costs of a title search, continuation of abstract and preparation of survey incurred by reason of any action, suit, proceeding, hearing, motion or application before any court or administrative body in and to which Lender may be or become a party by reason hereof.  Such proceedings shall include but not be limited to condemnation, bankruptcy, probate and administration proceedings, as well as any other action, suit, proceeding, right, motion or application wherein proof of claim is by law required to be filed or in which it becomes necessary to defend or uphold the terms of this Deed of Trust or the Loan Documents or otherwise purporting to affect the security hereof or the rights or powers of Lender.  All money paid or expended by Lender in that regard, together with interest thereon from date of such payment at the applicable interest rate shall be additional Indebtedness secured hereby and shall be immediately due and payable by Borrower without notice.

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42.

Upon the occurrence of an Event of Default, unless the same has been specifically waived in writing, all Rents collected or received by Borrower shall be accepted and held for Lender in trust and shall not be commingled with the funds and property of Borrower, but shall be promptly paid over to Lender.

43.

If more than one, all obligations and agreements of Borrower are joint and several.

44.

This Deed of Trust may be executed in counterparts, each of which shall be deemed an original; and such counterparts when taken together shall constitute but one agreement.

45.

Borrower shall pay Lender for every Lender statement furnished at Borrower's request the maximum fee allowed by law pursuant to Section 2943 of the Civil Code of California and all amendments thereto, the provisions of which are incorporated herein by reference and made a part hereof.  Such fee shall be computed as of the time said statement is furnished.

46.

Borrower hereby irrevocably authorizes Lender to apply any and all amounts received by Lender in repayment of amounts due under the Loan Documents first to amounts which are not guaranteed pursuant to the terms of any guaranty and then to amounts which are guaranteed pursuant to the terms of any guaranty.  Borrower hereby waives any and all rights it has or may have under Section 2822 of the California Civil Code which provides that if a guarantor is "liable upon only a portion of an obligation and the principal provides partial satisfaction of the obligation, the principal may designate the portion of the obligation that is to be satisfied."

47.

Notwithstanding anything to the contrary set forth herein or in any of the Loan Documents, this Deed of Trust shall not secure the following obligations (the "Unsecured Obligations"):  (i) any obligations evidenced by or arising under the Environmental Indemnity; and (ii) any other obligations in this Deed of Trust or in any of the other Loan Documents to the extent that such other obligations relate specifically to the presence on the Premises of Hazardous Materials and are the same or have the same effect as any of the obligations evidenced by or arising under the Environmental Indemnity (excluding the cost of any Tests incurred by Lender hereunder).  Any breach or default with respect to the Unsecured Obligations after the expiration of any applicable cure periods shall constitute an Event of Default hereunder, notwithstanding the fact that such Unsecured Obligations are not secured by this Deed of Trust.

48.

Borrower desires and intends that this Deed of Trust also constitute a fixture filing between Borrower as debtor and Lender as secured party, as defined in the Uniform Commercial Code.  To this end, Borrower acknowledges that (i) this

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Deed of Trust covers goods which are or are to become fixtures on the Land; (ii) this financing statement is to be recorded; (iii) Borrower is the record owner of such property; and (iv) products of collateral are also covered.  No financing statement in favor of any secured party other than Lender covering the personal property described herein or any portion thereof is on file in any public office.

IN WITNESS WHEREOF, Borrower has caused this Deed of Trust to be duly executed and delivered as of the date first above written.   

VMS NATIONAL PROPERTIES, an Illinois general partnership

By:

VMS NATIONAL RESIDENTIAL PORTFOLIO I, an Illinois limited partnership

By:

MAERIL, INC., a Delaware

                        corporation, its general partner

       By: /s/Patti K. Fielding

       Name:  Patti K. Fielding

                Title:  Executive Vice President  

                           and Treasurer

By:

VMS NATIONAL RESIDENTIAL PORTFOLIO II, an Illinois limited partnership

By:

MAERIL, INC., a Delaware

                        corporation, its general partner

       By: /s/Patti K. Fielding

       Name:  Patti K. Fielding

                Title:  Executive Vice President  

                           and Treasurer

EX-10

Exhibit 10.17

GUARANTY

755504

THIS GUARANTY (as the same may from time to time hereafter be modified, supplemented or amended, the "Guaranty") is made as of January 19, 2007, by AIMCO PROPERTIES, L.P., a Delaware limited partnership, having an office at Stanford Place 3, 4582 South Ulster Street Parkway, Suite 1100, Denver, Colorado 80237 ("Guarantor"), in favor of PRINCIPAL LIFE INSURANCE COMPANY, an Iowa corporation ("Lender").

RECITALS:

Lender has agreed to make a loan (the "Loan") in the original principal sum of Thirteen Million Eight Hundred Thousand and 00/100 Dollars ($13,800,000.00) (the "Loan Amount") to VMS NATIONAL PROPERTIES, an Illinois general partnership ("Borrower"); and

The Loan is evidenced by Borrower's secured promissory note made payable and delivered to Lender (as the same may from time to time hereafter be modified, amended, supplemented, extended or consolidated in writing, and any note(s) issued in exchange therefor or replacement thereof, the "Note") and further evidenced and secured by a "Mortgage" (it being agreed that "Mortgage" as hereinafter used shall be construed to mean "mortgage" or "deed of trust" or "trust deed" or "deed to secure debt" as the context so requires) on certain real estate located in Los Angeles County, California, together with all existing improvements constructed thereon, said Premises being more particularly described in said Mortgage, and an Assignment of Leases ("Assignment of Leases"); and

In connection with the Loan, the Borrower has also executed that certain Environmental Indemnity ("Environmental Indemnity") for the benefit of Lender (the Note, Environmental Indemnity, Mortgage and Assignment of Leases and all other instruments or agreements by which the Loan is evidenced or secured are hereinafter collectively referred to as the "Underlying Instruments"); and

It is a condition of Lender's agreement to make the Loan that Guarantor be unconditionally liable for and personally guarantee the payment and performance of certain liabilities and obligations of the Borrower under the Underlying Instruments upon the terms and conditions as are hereinafter set forth and except for such liabilities and obligations described herein, Guarantor shall have no liability in connection with, or responsibility to perform, under or in accordance with the Underlying Instruments; and

WHEREAS, Guarantor is financially interested in Borrower and is materially benefited by the consummation of the Loan and has agreed to unconditionally and personally guarantee the payment and performance of certain liabilities and obligations of Borrower under the Underlying Instruments upon the terms and conditions as are hereinafter set forth.

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NOW, THEREFORE, in order to induce Lender to make the Loan to Borrower, Guarantor intending to be legally bound, hereby makes the following representations and warranties to the Lender and hereby covenants and agrees with the Lender as follows:

1.

Guarantor absolutely, irrevocably and unconditionally guarantees to the Lender payment and the full, faithful and timely performance of any and all liabilities and obligations of Borrower whether now existing or hereafter incurred under the Environmental Indemnity and paragraph 9 of the Note (all of which payments, liabilities and obligations are hereinafter collectively referred to as the "Guaranteed Obligations").

2.

Guarantor absolutely, irrevocably and unconditionally waives notice of acceptance of this Guaranty and notice of any payment, liability or obligation to which it may apply, and waives presentment, demand of payment, protest, notice of dishonor or nonpayment of such liabilities under this Guaranty or any of the Underlying Instruments creating the Guaranteed Obligations and any suit or taking other action by the Lender against, and any other notice to, any party liable thereon or any property which may be security therefor.

3.

The Lender may at any time and from time to time without the consent of, or notice to, Guarantor, without incurring any responsibility to Guarantor and without impairing or releasing any of the obligations of Guarantor hereunder, upon or without any terms or conditions and in whole or in part:

(a)

renew, alter or change the interest rate, manner, time, place or terms of payment or performance of any of the Guaranteed Obligations, or any liability incurred directly or indirectly in respect thereof, whereupon the guaranty herein made shall apply to the Guaranteed Obligations as so changed, extended, renewed or altered;

(b)

sell, exchange, release, surrender, and in any manner and in any order realize upon or otherwise deal with any property at any time directly and absolutely assigned or pledged or mortgaged to secure the Guaranteed Obligations or any liabilities (including any of those hereunder) incurred directly or indirectly in respect thereof;

(c)

exercise or refrain from exercising any rights against Borrower or any other person (including Guarantor) or otherwise act or refrain from acting with regard to the Underlying Instruments, Guaranteed Obligations or this Guaranty;

(d)

settle or compromise any of the Guaranteed Obligations, any security therefor or any liability (including any of those hereunder) incurred directly or indirectly in respect thereof or hereof, and/or subordinate the payment of all or any part thereof to the payment of any liability of Borrower (whether or not then due) to creditors of Borrower other than the Lender and Guarantor;

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(e)

apply any sums in whatever manner paid or realized to any liability or liabilities of Borrower to the Lender regardless of what liability or liabilities of Borrower remain unpaid;

(f)

consent to or waive any breach of or any act, omission or default under the Underlying Instruments or otherwise amend, modify or supplement any of such instruments or agreements; and/or

(g)

sell, convey or assign, whether into a securitized transaction or otherwise, all or any part of Lender's interest in this Guaranty and the Underlying Instruments.

4.

(a)

No invalidity, irregularity or unenforceability of all or any part of the Underlying Instruments, the Guaranteed Obligations or this Guaranty, or of any security therefor, shall affect, impair or constitute a defense to this Guaranty.  This Guaranty is a direct and primary obligation of Guarantor, and Guarantor's obligations hereunder are not as a surety.  This is a guaranty of payment and performance, and not merely a guaranty of collection.

(b)

Guarantor acknowledges and agrees that this Guaranty and Guarantor's obligations with respect to payments and performance under the Environmental Indemnity shall remain in full force and effect, notwithstanding the fact that the Note and payments due under the other Underlying Instruments have been paid in full.  The Guarantor’s obligations with respect to payments and performance under paragraph 9 of the Note shall remain in full force and effect until the liabilities and obligations of Borrower under paragraph 9 of the Note have been paid and performed in full.

5.

(a)

Notwithstanding any payment or payments made by Guarantor hereunder, Guarantor will not assert or exercise any right of the Lender or of such Guarantor against Borrower to recover the amount of any payment made by such Guarantor to the Lender by way of subrogation, reimbursement, contribution, indemnity or otherwise arising by contract or operation of law, and Guarantor shall not have any right of recourse to or any claim against assets or property of Borrower, whether or not the obligations of Borrower have been satisfied, all of such rights being herein expressly waived by Guarantor.  The provisions of this paragraph shall survive the termination of this Guaranty, and any satisfaction and discharge of Borrower by virtue of any payment, court order or any applicable law.

(b)

Notwithstanding the provisions of Section 5(a), Guarantor shall have and be entitled to all rights of subrogation otherwise provided by applicable law in respect of any payment Guarantor may make or be obligated to make under this Guaranty, and to assert and enforce the same, in each case on and after, but at no

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time prior to, the date (the "Subrogation Trigger Date") which is 91 days after the date on which all obligations under the Underlying Instruments shall have been paid or performed in full, if and only if the existence of Guarantor's rights under this Section 5(b) would not make Guarantor a creditor (as defined in the Bankruptcy Reform Act of 1978, an amended, 11 U.S.C. Sections 101 et seq., and the regulations adopted and promulgated pursuant thereto) of Borrower in any insolvency bankruptcy, reorganization or similar proceeding commenced on or prior to the Subrogation Trigger Date.

(c)

In the event that Guarantor shall advance or become obligated to pay any sums with respect to any obligation hereby guaranteed or in the event that for any reason whatsoever the Borrower or any subsequent owner of the collateral securing the Loan is now, or shall hereafter become, indebted to Guarantor, Guarantor agrees that the amount of such sums and of such Indebtedness together with all interest thereon, shall at all times be subordinate as to the lien, time of payment and in all other respects, to all sums, including principal, interest and other Indebtedness, at any time owing to the Lender under any of the Underlying Instruments.  Nothing herein contained is intended or shall be construed to give to Guarantor any right to participate in any way in the right, title or interest of the Lender in or to the collateral securing the Loan, notwithstanding any payments made by Guarantor under this Guaranty, all such rights of parti cipation being hereby expressly waived and released.

(d)

Guarantor waives all rights and defenses arising out of an election of remedies by the creditor, even though that election of remedies, such as a nonjudicial foreclosure with respect to security for a guaranteed obligation, has destroyed the guarantor's rights of subrogation and reimbursement against the principal by the operation of Section 580d of the Code of Civil Procedure or otherwise.

(e)

Guarantor waives any rights Guarantor might have pursuant to the terms of Sections of the California Civil Code or Code of Civil Procedure including without limitation the following: (i) Guarantor waives the benefit of any statute of limitations affecting Guarantor's liability hereunder or the enforcement thereof, including, without limitation all rights and benefits, if any, arising under Section 359.5 of the California Code of Civil Procedure; (ii) Guarantor hereby waives, to the fullest extent permitted by law, all rights and benefits under Section 2809 of the California Civil Code purporting to reduce a guarantor's obligations in proportion to the principal obligation, all rights and benefits under Section 580a of the California Code of Civil Procedure purporting to limit the amount of any deficiency judgment which might be recoverable following the occurrence of a trustee's sale under the Deed of Trust, all rights and benefits un der Section 580b of the California Code of Civil Procedure stating that no deficiency may be recovered on a real property purchase money obligation and all rights and benefits

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under Section 580d of the California Code of Civil Procedure stating that no deficiency may be recovered on a note secured by a deed of trust on real property in case such real property is sold under the power of sale contained in such deed of trust, to the extent any such sections have any application hereto or any application to Guarantor; (iii) Guarantor waives all rights and defenses that the Guarantor may have because the Borrower's debt is secured by real property.  This means, among other things:  (1) Lender may collect from the Guarantor without first foreclosing on any real or personal property collateral pledged by the Borrower, (2) if Lender forecloses on any real property collateral pledged by the Borrower:  (A) the amount of debt may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than th e sale price, (B) Lender may collect from the Guarantor even if Lender, by foreclosing on the real property collateral, has destroyed any right the Guarantor may have to collect from Borrower.  This is an unconditional and irrevocable waiver of any rights and defenses the Guarantor may have because Borrower's debt is secured by real property.  These rights and defenses include, but are not limited to, any rights or defenses based upon Section 580a, 580b, 580d, or 726 of the Code of Civil Procedure; (iv) without limiting the generality of the foregoing or any other provision hereof, the Guarantor waives all rights and benefits which might otherwise be available to the Guarantor under Division Third, Part 4, Title XII of the California Civil Code.

6.

Guarantor agrees that to the extent that Borrower makes a payment or payments to Lender, which payment or payments or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required, for any of the foregoing reasons or for any other reasons, to be repaid or paid over to a custodian, trustee, receiver or any other party under any bankruptcy act, state or federal law, common law or equitable cause, then to the extent of such payment or repayment, the obligation or part thereof intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made.

7.

Guarantor makes the following representations and warranties which shall survive the execution and delivery of this Guaranty:

(a)

Guarantor is and, until the Indebtedness is paid in full, will continue to (i) be a duly organized and validly existing entity in good standing under the laws of the state of its formation, (ii) be duly qualified as a foreign entity in each jurisdiction in which the nature of its business makes such qualification necessary or desirable, (iii) have the requisite power and authority to carry on its business as now being conducted, (iv) have the requisite power to execute, deliver and perform its obligations under this Guaranty, and (v) comply with the provisions of all of its organizational documents, and the Legal Requirements of the state of its formation.

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(b)

The execution, delivery and performance of this Guaranty (i) are within the applicable powers of Guarantor; (ii) have been authorized by all requisite action; (iii) have received all necessary approvals and consents, corporate, governmental or otherwise; (iv) does not and will not violate, conflict with, result in a breach of or constitute (with notice or lapse of time, or both) a default under any provision of law, any order or judgment of any court or governmental authority, the articles of incorporation, by-laws, partnership, operating or trust agreement, or other governing instrument of Guarantor, or any indenture, agreement or other instrument to which Guarantor is a party or by which Guarantor or any of Guarantor's assets is or may be bound or affected; (v) does not and will not result in the creation or imposition of any lien, charge or encumbrance whatsoever upon any of Guarantor's assets; and (vi) does not and will not requir e any authorization or license from, or any filing with, any governmental authority or other body.

(c)

This Guaranty constitutes the legal, valid and binding obligations of Guarantor, enforceable against Guarantor in accordance with its terms, except as may be limited by (i) bankruptcy, insolvency, reorganization or other similar laws affecting the rights of creditors generally, and (ii) general principles of equity (regardless of whether considered in a proceeding in equity or at law).

8.

Guarantor and Borrower are separate and distinct entities with no identity of interest with respect to any Indebtedness which may become owed or any payments which may be made hereunder.  Borrower is not contractually bound to Guarantor with respect to any payments hereafter made under this Guaranty in any manner which would have the effect of imputing the liability of Guarantor hereunder to Borrower.

9.

Guarantor is related and/or affiliated with Borrower, has personal knowledge of and is familiar with Borrower's business affairs, books and records and has the ability to influence Borrower's financial decisions.  Guarantor represents that Borrower is in sound financial condition as of the date of this Guaranty.

10.

Nothing herein contained shall in any manner affect the lien or priority of the Mortgage, and upon the occurrence of an Event of a Default, the Lender may invoke any remedies it may have under the Underlying Instruments, or this Guaranty, either concurrently or successively and the exercise of any one or more of such remedies shall not be deemed an exhaustion of such remedy or remedies or a waiver of any other remedy or remedies and shall not be deemed an election of remedies.  Guarantor hereby specifically waives any defense to its performance under this Guaranty based upon an election of remedies by Lender, including but not limited to an election to foreclose by nonjudicial sale under any deed of trust or security agreement and pursue any other remedy which destroys, lessens or otherwise affects Guarantor's subrogation rights and/or its rights to reimbursement from or to proceed against Borrower or any other person, when resul ting from the judicial

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or nonjudicial foreclosure (under any deed of trust or security agreement) or the selling or otherwise disposing of or collecting or applying any property, real or personal, securing the Note, or otherwise.  The exercise by the Lender of any such remedies shall not release or discharge Guarantor from its obligations hereunder unless and until the full amount of the Indebtedness evidenced by the Note and secured as aforesaid has been fully paid and satisfied, and any such release or discharge shall be subject to the provisions of paragraph 4(b) hereof.

11.

This Guaranty shall remain in full force and effect until all obligations of the Borrower under the Underlying Instruments have been satisfied in full and are no longer subject to disgorgement under any applicable state or federal creditor rights or bankruptcy laws.  No delay on the part of the Lender in exercising any options, powers or rights, or the partial or single exercise thereof, shall constitute a waiver thereof.  No waiver of any rights hereunder, and no modification or amendment of this Guaranty, shall be deemed to be made by either party unless the same shall be in writing, duly signed on behalf of such party, and each such waiver (if any) shall apply only with respect to the specific instance involved and shall in no way impair the rights of such party or the obligations of Guarantor to the Lender in any other respect at any other time.  This Guaranty and the rights and obligations of the Lender and of Guar antor hereunder shall be governed and construed in accordance with the laws of the state of California, without regard to its conflicts of law principles and this Guaranty is binding upon Guarantor, Guarantor's heirs, personal representatives and permitted successors or assigns, and shall inure to the benefit of the Lender and its successors or assigns.

12.

Guarantor acknowledges that copies of the Underlying Instruments have been made available to Guarantor and that Guarantor is familiar with their contents.  Guarantor affirmatively agrees that upon any Permitted Transfer effected in accordance with the provisions of the Underlying Instruments or any transfer by Lender of all or any portion of its interest in the Loan, it shall not be necessary for Guarantor to reaffirm its continuing obligations under this Guaranty, but Guarantor will do so upon request by Lender.

13.

GUARANTOR AND LENDER EACH KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE, TO THE EXTENT PERMITTED BY LAW, TRIAL BY JURY IN ANY ACTIONS BROUGHT BY GUARANTOR OR LENDER IN CONNECTION WITH THIS GUARANTY, ANY OF THE LOAN DOCUMENTS, THE INDEBTEDNESS SECURED HEREBY, OR ANY OTHER STATEMENTS OR ACTIONS OF LENDER.

14.

Each notice, consent, request or other communication under this Guaranty (each a "Notice") which any party hereto may desire or be required to give to the other shall be deemed to be adequate and sufficient notice if given in writing and service is made by either (i) registered or certified mail, postage prepaid, in which case such notice shall be deemed to have been received three (3) business days following deposit to U.S. mail; or

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(ii) nationally recognized overnight air courier, next day delivery, prepaid, in which case such notice shall be deemed to have been received one (1) business day following delivery to such nationally recognized overnight air courier.  All Notices shall be addressed to Guarantor at its address given on the first page hereof, or to Lender at c/o Principal Real Estate Investors, LLC, 801 Grand Avenue, Des Moines, Iowa 50392-1450, Attn: Commercial Real Estate Servicing, Loan No. 755504, or to such other place as any party may by notice in writing to the other parties designate as a place for service of notice.

15.

Each Guarantor (if more than one) whose signature appears below shall be deemed to be bound by the provisions of this Guaranty and the Guaranteed Obligations, whether each signature was affixed at the same or different times, and the term "Guarantor" as used herein shall be deemed to refer to each individually, as well as collectively, and each of the undersigned shall be jointly and severally liable for the Guaranteed Obligations hereunder, both personally and with recourse, irrespective of the recourse or non-recourse nature of the Underlying Instruments.  Guarantor agrees that if this Guaranty is placed in the hands of an attorney for enforcement, Guarantor will reimburse Lender all expenses incurred, including attorney's fees.

16.

This Guaranty may be executed in counterparts, each of which shall be deemed an original; and such counterparts when taken together shall constitute but one agreement.

17.

Capitalized terms used herein and not otherwise defined shall have the meanings given to them in the Underlying Instruments.

18.

Guarantor hereby irrevocably authorizes Lender to apply any and all amounts received by Lender in repayment of the Loan first to amounts which are not guaranteed pursuant to the terms of any guaranty and then to amounts which are guaranteed pursuant to the terms of any guaranty.  Guarantor hereby waives any and all rights it has or may have under Section 2822 of the California Civil Code which provides that if a guarantor is "liable upon only a portion of an obligation and the principal provides partial satisfaction of the obligation, the principal may designate the portion of the obligation that is to be satisfied."

19.

In the case of a power of sale foreclosure under the Mortgage, the fair market value of the real property collateral shall be conclusively deemed to be the amount of the successful bid at the foreclosure sale.  Guarantor waives any rights or benefits it may now or hereafter have to a fair value hearing under Section 580a of the California Code of Civil Procedure.  Lender shall have absolutely no obligation to make a bid at any foreclosure sale, but rather may make no bid or bid any amount which Lender, in its sole discretion, deems appropriate.

(Signatures on next page)

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IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be duly executed and delivered as of the date first set forth above.

GUARANTOR:

AIMCO PROPERTIES, L.P., a Delaware limited partnership

By:      AIMCO-GP, Inc., a Delaware   

            corporation, its general partner

            By: /s/Patti K. Fielding

       Name:  Patti K. Fielding

       Title:  Executive Vice President  

                              and Treasurer

EX-10

Exhibit 10.18

PROPERTY RESERVES AGREEMENT

755504

THIS PROPERTY RESERVES AGREEMENT (as the same may from time to time hereafter be modified, supplemented or amended, this "Agreement") is made as of January 19, 2007 by VMS NATIONAL PROPERTIES, an Illinois general partnership ("Borrower"), and PRINCIPAL LIFE INSURANCE COMPANY, an Iowa corporation ("Lender").

RECITALS

Lender has agreed to make a loan (the "Loan") in the original principal amount of Thirteen Million Eight Hundred Thousand and 00/100 Dollars ($13,800,000.00) (the "Loan Amount") to Borrower as set forth in the Loan Documents, executed by and between Lender and Borrower; and

The Loan is evidenced by Borrower's Secured Promissory Note made payable and delivered to Lender (as may be modified, amended, supplemented, extended or consolidated in writing, and any note(s) issued in exchange therefor or in replacement thereof, the "Note") and further evidenced and secured by, among other things, a "Mortgage" (it being agreed that Mortgage as hereinafter used shall be construed to mean "mortgage" or "deed of trust" or "trust deed" or "deed to secure debt" as the context so requires) on certain real estate, together with all existing improvements constructed thereon, said Premises being more particularly described in said Mortgage.

NOW THEREFORE, in consideration of the making of the Loan, the mutual promises and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Lender and Borrower, intending to be legally bound, agree as follows:

1.

Property Reserves.

Borrower has agreed to deposit with Lender a letter of credit(s) (if more than one, collectively if the context so requires the "Letter of Credit") as detailed below to be held by Lender to reimburse Borrower for the costs of certain capital improvements to the Premises as described in Schedule 1 hereto and such other capital improvements to the Premises that Lender determines, in its sole discretion, provide a material benefit/improvement to the Premises upon completion thereof  (i.e. roof replacement/repair, new decks, rehabilitation of individual units) ("Capital Improvements").  The Letter of Credit and any renewal or replacement thereof and any proceeds therefrom shall be held by Lender as additional security for the Loan and are hereafter referred to as the "Property Reserves".  The term "Escrow Release" as used herein shall refer to a disb ursement of funds and/or a reduction of a Letter of Credit as applicable.

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a.

On the Closing Date, Borrower shall deliver an acceptable Letter of Credit in the amount of $292,954.00 to cover the cost of Capital Improvements.

2.

Borrower shall deliver to Lender not later than 30 days prior to the expiration date of any Letter of Credit and any renewal or replacement Letter of Credit, a renewal or replacement unconditional, irrevocable bank Letter of Credit identical in terms and amount and issued by a United States bank acceptable to Lender.  If Borrower shall fail to deliver any renewal or replacement Letter of Credit in accordance with the foregoing requirements, Lender may, in its discretion, draw upon any Letter of Credit then in its possession and hold such proceeds in accordance with the terms hereof.

Lender reserves the right to periodically review the financial condition of the issuing bank for any Letter of Credit and any renewal or replacement Letter of Credit and if Lender determines that the issuing bank no longer satisfies the criteria set forth above, Lender may require a replacement Letter of Credit in form and substance and from a United States bank acceptable to Lender.

3.

Standard Disbursement Requirements.  The following shall be defined as "Standard Disbursement Requirements":

(i)

copies of unconditional lien waivers for work completed which is the subject of the Escrow Release request;

(ii)

a title search in form and substance reasonably acceptable to Lender and if such search discloses conditions unacceptable to Lender or Lender deems it reasonably necessary, then such endorsements or other assurances reasonably satisfactory to Lender from the title insurance company insuring the continued first lien priority of the Mortgage;

(iii)

to the extent Lender deems reasonably necessary and to the extent that same are available and appropriate for the work which is the subject of the Escrow Release request, any or all of the following at Lender's discretion:  (A) all permits, bonds, licenses and approvals, whether necessary for commencement, performance, completion, occupancy, use or otherwise required by any applicable laws for the stage of work so completed; (B) a copy of the construction contract and any change orders and addenda thereto; (C) a statement from an architect, contractor or engineering consultant, in Lender's reasonable discretion, as to the extent and cost of the work so completed; and/or (D) other evidence as reasonably determined by Lender showing that Borrower has completed and performed the portion of the work which is the subject of the Escrow Release request; and

(iv)

Lender having inspected, or having expressly waived in writing such inspection, and approved the completed portion of the work which is the subject of the

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Escrow Release request.  Lender shall not require said inspection more than once per calendar year.

4.

Capital Improvements.

a.

Except as hereinafter provided and so long as no Event of Default has occurred and is continuing under the Loan Documents, Lender shall allow Escrow Release(s) in the amounts hereinafter specified in accordance with the following terms and conditions:

(i)

Escrow Release(s) shall be for an amount equal to the actual costs and expenses incurred by Borrower in completing any Capital Improvements;

(ii)

Borrower shall submit written Escrow Release requests to Lender for Capital Improvements no more than once per calendar month and each such request shall be for an aggregate amount of not less than $25,000 (excluding the final disbursement); and

(iii)

Escrow Release(s) shall be conditioned upon Borrower furnishing to Lender with its written request, at Lender's discretion, the Standard Disbursement Requirements.

5.

Interest on Property Reserves.  Provided no Event of Default has occurred under any of the Loan Documents, Lender agrees to credit Borrower with interest earnings on the cash portion of the Property Reserves, (excluding however any cash proceeds resulting from Lender having drawn on any Letter of Credit or any renewal or replacement thereof); provided, however, that interest shall cease to be credited on any portion of the Property Reserves at such time as they have been disbursed to Borrower or otherwise applied in any manner provided in this Agreement or in the other Loan Documents.  Interest shall be credited on the average balance of the cash portion of the Property Reserves for the preceding calendar month or any portion of such preceding calendar month on or before the tenth (10^th) day of each calendar month at a rate equal to the thirty-day average of the daily 30-day Dealer Commercial Paper Rate as p ublished in the Wall Street Journal or similar financial publication, less 200 basis points.  Interest shall be disbursed to Borrower at such time and in the same manner as provided for disbursement of Property Reserves.

6.

Administration/Inspection Fee.  Lender shall be entitled to charge Borrower a reasonable processing fee for administering and reviewing an Escrow Release, not to exceed $500.00.  Lender shall also be entitled to charge Borrower reasonable processing fees both for reviewing any renewal or replacement Letter of Credit which Borrower is required to provide as well as for drawing upon any Letter of Credit held pursuant to the terms hereof (the processing fee for reviewing any renewal or replacement Letter of Credit shall not exceed $250.00).  Borrower shall be responsible for payment of all costs, fees and charges in connection with any

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reduction, renewal or replacement of the Letter of Credit which are assessed by the issuing bank.  Additionally, Lender shall be entitled to charge Borrower for any reasonable costs incurred by Lender in inspecting the Premises, not to exceed $750.00.

7.

Security Agreement.  This Agreement and the escrow of the Property Reserves under the terms hereof are intended to create a prior perfected security interest in the Property Reserves.  As more fully described in the Loan Documents, Borrower has assigned, conveyed, pledged and transferred to Lender and granted to Lender a first and continuing lien on and security interest in and to, among other things, all of Borrower's right, title and interest in and to the Property Reserves, which secure the full and punctual payment and performance of all of the Indebtedness.  Nothing contained herein shall cause Lender to be deemed a trustee of any Letter of Credit, any renewal thereof or any proceeds therefrom.  The Property Reserves shall not constitute any deposit or account of the Borrower or monies to which the Borrower is entitled upon demand, or upon the mere passage of time.  Lender shall not be required to s egregate the Property Reserves or hold them in any separate account for the benefit of the Borrower.  Upon the payment in full of all sums due to Lender under the Loan Documents, Lender shall promptly deliver the then existing Property Reserves to Borrower.

8.

Event of Default.  Upon the occurrence of an Event of Default under any of the Loan Documents, Lender may, with respect to the Property Reserves, or any portion thereof, exercise all enforcement rights and remedies granted to Lender under the Loan Documents and in addition to all other rights and remedies granted to Lender under the Loan Documents, Lender may, at its option, use such funds partially or in full (including any portion or all of the proceeds resulting from drawing on any Letter of Credit), in such order and preference as Lender may determine, to (1) cure or partially cure any Event of Default; (2) complete the work which is the subject of this Agreement; (3) pay any interest accrued under the terms of the Note; (4) pay any other Indebtedness; (5) pay the Make Whole Premium, if any, due and payable; (6) prepay the principal amount of the Loan or any part thereof; or (7) hold such funds in a non-interest bearing account as additional security for the Loan.  In the event the Property Reserves or any portion thereof are applied to prepay the principal amount of the Loan or any part thereof, Borrower waives any right to prepay the principal amount in whole or in part without premium, and agrees to pay, as liquidated damages and not as a penalty, a Make Whole Premium on any principal amount prepaid.  Notwithstanding anything contained herein to the contrary, nothing shall be construed to (a) make Lender responsible for performing or completing the work which is the subject of this Agreement, (b) require Lender to expend sums to complete the work which is the subject of this Agreement which are in excess of such amounts then allocated by Lender for such items, or (c) obligate Lender to demand from Borrower additional sums to complete the work which is the subject of this Agreement.

9.

Cost Overruns.  In the event that the costs and expenses incurred by Borrower in completing any work which is the subject of this Agreement exceed the respective amounts allocated by Lender for such items of expense, Borrower shall be responsible for the payment (from sources other than the Property Reserves) of such excess costs and expenses.

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10.

Notices.  All notices required to be sent hereunder shall be deemed to be an adequate and sufficient notice if given in accordance with the notice provisions of the Mortgage.

11.

Governing Law.  This Agreement shall be governed, construed, and enforced in accordance with the laws of the state in which the Premises is located, without regard to its conflicts of law principles.

12.

Headings.  The headings used herein are for convenience only and are not to be used in interpreting this Agreement.  Capitalized terms used herein and not otherwise defined shall have those meanings given to them in the Loan Documents.  Notwithstanding anything herein to the contrary, the terms and provisions of this Agreement as to Escrow Release(s) shall control over any provisions in the other Loan Documents to the contrary.

13.

Amendments.  This Agreement, and any provisions hereof, may not be modified, amended, waived, extended, changed, discharged or terminated orally or by any act or failure to act on the part of Borrower or Lender, but only by an agreement in writing signed by the parties hereto.

14.

Counterparts.  This Agreement may be executed in counterparts, each of which shall be deemed an original; and such counterparts when taken together shall constitute but one agreement.

15.

Inapplicable Provisions.  If any term, covenant or condition of this Agreement is held to be invalid, illegal or unenforceable in any respect, this Agreement shall be construed without such provision.

16.

Successors and Assigns.  This Agreement and all the provisions hereof shall inure to the benefit of the heirs, successors and assigns of Lender and shall bind the heirs, representatives, and permitted successors and assigns of Borrower.

(Signatures on next page)

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IN WITNESS WHEREOF, Borrower and Lender have hereunto caused this Agreement to be executed the date first above written.

LENDER:

PRINCIPAL LIFE INSURANCE COMPANY, an Iowa corporation

By:

PRINCIPAL REAL ESTATE INVESTORS, LLC, a Delaware limited liability company, its authorized signatory

By

__________________________

Name:

Title:

By

__________________________

Name:

Title:

(Signatures continued on following page)

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BORROWER:

VMS NATIONAL PROPERTIES, an Illinois general partnership

By:

VMS NATIONAL RESIDENTIAL PORTFOLIO I, an Illinois limited partnership

By:

MAERIL, INC., a Delaware  

                        corporation, its general partner

       By: /s/Patti K. Fielding

       Name:  Patti K. Fielding

                Title:  Executive Vice President  

                           and Treasurer

By:

VMS NATIONAL RESIDENTIAL PORTFOLIO II, an Illinois limited partnership

By:

MAERIL, INC., a Delaware  

                        corporation, its general partner

       By: /s/Patti K. Fielding

       Name:  Patti K. Fielding

                Title:  Executive Vice President  

                           and Treasurer

EX-10

Exhibit 10.19

SECURED PROMISSORY NOTE

755503

$23,800,000.00

January 19, 2007

1.

FOR VALUE RECEIVED, VMS NATIONAL PROPERTIES, an Illinois general partnership, as "Borrower" ("Borrower"), hereby promises to pay to the order of PRINCIPAL LIFE INSURANCE COMPANY, an Iowa corporation (as "Lender"), the principal sum of Twenty-three Million Eight Hundred Thousand and 00/100 Dollars ($23,800,000.00) or so much thereof as shall from time to time have been advanced, together with interest on the unpaid balance of said sum from January 19, 2007 (the "Closing Date"), at the rate of six and sixteen one-hundredths percent (6.16%) per annum.  

A payment of interest from the Closing Date to and including January 31, 2007 shall be paid on the Closing Date calculated by multiplying the actual number of days elapsed in the period for which interest is being calculated by a daily rate based on the foregoing annual interest rate and a 360-day year.  Thereafter, interest shall be computed on the unpaid balance on the basis of a 360-day year composed of twelve 30-day months.  Beginning on March 1, 2007, interest shall be due and payable in installments of One Hundred Twenty-two Thousand One Hundred Seventy-three and 33/100 Dollars ($122,173.33), with an installment in a like amount due and payable on the same day of each month thereafter, and except as otherwise provided in this Note, all remaining principal and interest to the date of payment and other indebtedness shall be due and payable on February 1, 2010 ("Call Date").  Lender sha ll have the right to declare this Note to be due and payable in full on the Call Date or to adjust the per annum interest rate on the Rate Adjustment Date to an interest rate established by Lender ("Adjusted Interest Rate") as herein provided (and apply an amortization schedule, if any, as herein provided).  In the event Lender elects to declare this Note to be due and payable, this Note shall become due and payable, in full, without a Make Whole Premium on the Call Date.  In the event Lender elects to adjust the interest rate, then on February 1, 2010 ("Rate Adjustment Date") the per annum interest rate shall be adjusted to the Adjusted Interest Rate and commencing on March 1, 2010, monthly installments of principal (if applicable) and interest shall be due and payable on the same day of each month thereafter, except that all remaining principal and interest to the date of payment shall be due and payable on February 1, 2012 or such earlier date res ulting from acceleration of the Indebtedness by Lender ("Maturity Date").  Each installment shall be credited first upon interest then accrued and the remainder upon principal.  All principal and interest shall be paid in lawful money of the United States of America, by wire transfer of immediately available funds to Lender.  Any other monthly deposits or payments Borrower is required to make to Lender under the terms of the Loan Documents shall be made by the same payment method and on the same date as the installments of principal and interest due under this Note.

Lender shall notify Borrower in writing ("Lender's Election Notice") on or before November 1, 2009 of Lender's election to adjust the interest rate or of Lender's intention to

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declare this Note to be due and payable in full.  In the event Lender elects to adjust the interest rate, Lender's Election Notice will contain (i) the number of basis points ("Spread") and the United States Treasury Issue (which shall be the two (2) year United States Treasury Issue) that Lender anticipates it will use to establish the Adjusted Interest Rate and (ii) the amortization schedule Lender has elected to apply, if any.  The Spread shall be determined by Lender in its sole discretion based on Lender's evaluation of:  (i) the then current financial performance and projected risk of the Premises, which shall encompass various factors, including but not limited to contract debt service coverage, loan-to-value ratio, economic debt service coverage, occupancy, frequency of tenant rollover, financial strength and stability of tenants; (ii) the then current financial status of Borrower, which shall include but not be l imited to creditworthiness, financial strength, percentage of liabilities to liquid assets, and annual net income; and (iii) the remaining term and current outstanding balance of the Note.  

At any time and from time to time before the Adjusted Interest Rate is established, provided at least seven (7) days have elapsed since the previous Lender's Election Notice, Lender may establish a new Spread which Lender anticipates it will use to establish the Adjusted Interest Rate and notify Borrower of the same.  The Adjusted Interest Rate and amortization schedule, if any, must be established by mutual written agreement of Lender and Borrower by December 1, 2009 (the "Rate Set Deadline").  The Adjusted Interest Rate may only be established by mutual written agreement of Lender and Borrower and simultaneous payment by Borrower of Twelve Thousand Three Hundred and 00/100 Dollars ($12,300.00) ("Rate Adjustment Fee"). Notwithstanding anything contained herein to the contrary in the event:  (i) Lender notifies Borrower of its intention to declare this Note to be due and payable in full, (ii) Lender and Borrower are unable for any reason to mutually agree in writing on the Adjusted Interest Rate by the Rate Set Deadline; or (iii) Borrower fails to pay the Rate Adjustment Fee to Lender when due, this Note shall become due and payable in full, on the Call Date, without a Make Whole Premium, and all principal, interest accrued or to accrue to the date of prepayment at the rate in effect at the time of the initial Lender's Election Notice, and all other Indebtedness shall become immediately due and payable in full.  Notwithstanding any other provision herein, Lender shall not be obligated to adjust the interest rate if any default exists under this Note or the Loan Documents.

In the event Borrower accepts the Adjusted Interest Rate, then notwithstanding anything herein or in any of the Loan Documents to the contrary, Borrower shall have no right to prepay the Loan at par during the Open Period and any prepayment will be subject to a Make Whole Premium for the period ending on the Maturity Date calculated at the Adjusted Interest Rate.

In the event Borrower accepts the Adjusted Interest Rate, Borrower is required to provide Lender the following:

(i)

a new ALTA standard loan title policy for the Loan or an endorsement updating said title policy in the full amount of the in form and by an issuer satisfactory to Lender at the time of the rate adjustment unless (x) the outstanding balance of the

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Loan at the time of the Call Date is equal to or less than $20,000,000.00, (y) no liens or encumbrances exist against the Premises except as previously approved by Lender in the Deed of Trust, and (z) no mortgages or deeds of trust exist against the Premises except for the Mortgage.  Borrower further agrees that the policy shall insure Lender's Deed of Trust, at the Adjusted Interest Rate to be a first and prior lien subject only to those exceptions which were previously approved by Lender and provide coverage against mechanic's liens;

(ii)

an amendment to the Note in form and substance satisfactory to Lender executed by Borrower evidencing the Adjusted Interest Rate and a representation that the Premises is free and clear of any liens, privileges, mortgages or encumbrances except as expressly permitted in the Deed of Trust;

(iii)

a usury opinion or endorsement to the title policy acceptable to Lender if Lender reasonably believes that the Adjusted Interest Rate is or may be usurious; and

(iv)

a title search acceptable to Lender and reimbursement for Lender's costs incurred in obtaining the same.

2.

No privilege is reserved by Borrower to prepay any principal of this Note prior to the Maturity Date, except on or after the date hereof, privilege is reserved, after giving thirty (30) days' prior written notice to Lender, to prepay in full, but not in part, all principal and interest to the date on which payment is made, along with all sums, amounts, advances, or charges due under any instrument or agreement by which this Note is secured, upon the payment of a "Make Whole Premium" if required by the schedule below, provided that Borrower simultaneously exercises its right to prepay the Other Note as provided for therein.  The Make Whole Premium shall be based on the following schedule:

(i)

if prepayment occurs prior to March 1, 2008 or after February 1, 2010 and prior to March 1, 2011, the Make Whole Premium shall be one-half percent (.50%) of the principal amount to be prepaid;

(ii)

provided no Event of Default exists, during the period beginning on or after March 1, 2008 to and including February 1, 2010 or on or after March 1, 2011 to and including February 1, 2012 (each collectively the "Open Period") no Make Whole Premium shall be payable.

3.

Borrower agrees that if Lender accelerates the whole or any part of the principal sum evidenced hereby after the occurrence of an Event of Default but prior to the Open Period, Borrower waives any right to prepay said principal sum in whole or in part without premium and agrees to pay, as yield maintenance protection and not as a penalty, the Make Whole Premium.  

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In the event any proceeds from a casualty or Taking of the Premises are applied to reduce the principal balance hereof, such reduction shall be made without a Make Whole Premium, provided no Event of Default then exists under the Loan Documents.

Borrower by adding its initials to the end of this paragraph, (A) expressly waives any rights it may have under California Civil Code Section 2954.10 to prepay this Note, in whole or in part, without penalty, upon acceleration of the Indebtedness and (B) acknowledges and agrees that Borrower has no right of prepayment of this Note, except as provided above; and that, if the maturity of this Note is accelerated by Lender, Borrower specifically agrees to pay as a prepayment premium, the applicable sum specified herein as the Make Whole Premium, specifically including but not limited to the case where the holder of this Note has accelerated the maturity of this note due to Borrower's default of any provision contained in 2(f) of the Deed of Trust.  By initialing this provision, Borrower hereby declares that Lender's agreement to make the Loan evidenced by this Note for the interest rate and for the term set forth in this Note con stitutes adequate consideration, given individual weight by Borrower, for this waiver and agreement.

Initials: ________________    ________________

4.

If any payment of principal, interest, or other Indebtedness is not made when due, damages will be incurred by Lender, including additional expense in handling overdue payments, the amount of which is difficult and impractical to ascertain.  Borrower therefor agrees to pay, upon demand, the sum of four cents ($.04) for each one dollar ($1.00) of each said payment which becomes overdue ("Late Charge") as a reasonable estimate of the amount of said damages, subject, however, to the limitations contained in paragraph 6 hereof.

Notwithstanding anything hereinabove to the contrary, the Late Charge assessed on any amount due on the Maturity Date or the Call Date (if Lender declares this Note due and payable as described hereinabove) but not then paid, whether or not by acceleration, shall not be four cents for each one dollar as described above, but shall instead be a sum equal to the interest which would have accrued on the principal balance then outstanding from the date the payment was due to the end of the month in which the Maturity Date or Call Date (if applicable) occurs.  Such Late Charge shall be in addition to interest otherwise accruing under this Note.

5.

If any Event of Default has occurred and is continuing under the Loan Documents, the entire principal balance of the Loan, interest then accrued, and Make Whole Premium, and all other Indebtedness whether or not otherwise then due, shall at the option of Lender, become immediately due and payable without demand or notice, and whether or not Lender has exercised said option, interest shall accrue on the entire principal balance, interest then accrued, Make Whole Premium and any other Indebtedness then due, at a rate equal to the Default Rate until fully paid.

6.

Notwithstanding anything herein or in any of the other Loan Documents to the contrary, no provision contained herein or therein which purports to obligate Borrower to pay any amount

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of interest or any fees, costs or expenses which are in excess of the maximum permitted by applicable law, shall be effective to the extent it calls for the payment of any interest or other amount in excess of such maximum.  All agreements between Borrower and Lender, whether now existing or hereafter arising and whether written or oral, are hereby limited so that in no contingency, whether by reason of demand for payment or acceleration of the maturity hereof or otherwise, shall the interest contracted for, charged or received by Lender exceed the maximum amount permissible under applicable law.  If, from any circumstance whatsoever, interest would otherwise be payable to Lender in excess of the maximum lawful amount, the interest payable to Lender shall be reduced to the maximum amount permitted under applicable law; and if from any circumstance Lender shall ever receive anything of value deemed interest by applicable law in excess of the ma ximum lawful amount, an amount equal to any excessive interest shall, at the option of Lender, be refunded to Borrower or be applied to the reduction of the principal hereof, without a Make Whole Premium and not to the payment of interest or, if such excessive interest exceeds the unpaid balance of principal hereof such excess shall be refunded to Borrower.  This paragraph shall control all agreements between Borrower and Lender.

7.

Borrower and any endorsers or guarantors waive presentment, protest and demand, notice of protest, demand and dishonor and nonpayment, and agree the Maturity Date of this Note or any installment may be extended without affecting any liability hereunder, and further promise to pay all reasonable costs and expenses, including but not limited to, reasonable attorney's fees incurred by Lender in connection with any default or in any proceeding to interpret and/or enforce any provision of the Loan Documents.  No release of Borrower from liability hereunder shall release any other maker, endorser or guarantor hereof.

8.

This Note is secured by the Loan Documents creating among other things legal and valid encumbrances on and an assignment of all of Borrower's interest in any Leases of the Premises located in the county of Alameda, State of California.  Capitalized terms used herein and not otherwise defined shall have those meanings given to them in the Loan Documents.  In no event shall such documents be construed inconsistently with the terms of this Note, and in the event of any discrepancy between any such documents and this Note, the terms hereof shall govern.  The proceeds of this Note are to be used for business, commercial, investment or other similar purposes, and no portion thereof will be used for any personal, family or household use.  This Note shall be governed by and construed in accordance with the laws of the State where the Premises is located, without regard to its conflict of law principles.

9.

Notwithstanding any provision to the contrary in this Note or the Loan Documents and except as otherwise provided for below, the liability of Borrower under the Loan Documents shall be limited to the interest of Borrower in the Premises and the Rents.  In the event of foreclosure of the liens evidenced by the Loan Documents, no judgment for any deficiency upon the Indebtedness evidenced by the Loan Documents shall be sought or obtained by Lender against Borrower.  Nothing herein shall in any manner limit or impair (i) the lien or enforcement of the Loan Documents pursuant to the terms thereof or (ii) the obligations of any indemnitor or guarantor, if any.

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Notwithstanding any provision hereinabove to the contrary, Borrower shall be personally liable to Lender for:

(a)

any loss or damage to Lender arising from (i) the sale or forfeiture of the Premises resulting from Borrower's failure to pay any of the taxes, assessments or charges specified in the Loan Documents or (ii) Borrower's failure to insure the Premises in compliance with the provisions of the Loan Documents;

(b)

any event or circumstance for which Borrower indemnifies Lender under the Environmental Indemnity;

(c)

nonpayment of taxes, assessments, insurance premiums and utilities for the Premises and any penalty or late charge associated with nonpayment thereof prior to the Sale (as defined below) of the Premises;

(d)

any loss or damage to the Premises as a result of waste, gross negligence or willful misconduct by Borrower;  

(e)

intentionally deleted;

Borrower's personal liability for items specified in (c) and (d) above shall be limited to the amount of rents, issues, proceeds and profits from the Premises ("Rents and Profits") received by Borrower for the twenty-four (24) months preceding an Event of Default and thereafter; but less any such Rents and Profits applied to (A) payment of principal, interest and other charges when due under the Loan Documents, or (B) payment of expenses for the operation, maintenance, taxes, assessments, utility charges and insurance of the Premises including sufficient reserves for the same or replacements or renewals thereof ("Operation Expense(s)") provided that (x) Borrower has furnished Lender with evidence reasonably satisfactory to Lender of the Operation Expenses and payment thereof, and (y) any payments to parties related to Borrower shall be considered an Operation Expense only to the extent that the amount expended for the Operation Expense does not exceed the then current market rate for such Operation Expense.

(f)

misapplication or misappropriation of rents in violation of the Loan Documents;  

(g)

any security deposits of tenants not otherwise applied in accordance with the terms of the Lease(s), together with any interest on such security deposits required by law or the leases, not turned over to Lender upon conveyance of the Premises to Lender pursuant to foreclosure or power of sale or by a deed acceptable to Lender in form and content;

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(h)

any loss or damage to Lender arising from the misapplication or misappropriation of tax reserve accounts, tenant improvement reserve accounts, security deposits, prepaid rents or other similar sums paid to or held by Borrower or any other entity or person in connection with Borrower’s operation of the Premises;

(i)

any insurance or condemnation proceeds or other similar funds or payments applied by Borrower in a manner other than as expressly provided in the Loan Documents;

(j)

any loss or damage to Lender arising from any fraud or willful misrepresentation by or on behalf of Borrower, Interest Owner or any guarantor regarding the Premises, the making or delivery of any of the Loan Documents or in any materials or information provided by or on behalf of Borrower, Interest Owner or guarantor, if any, in connection with the Loan; and

(k)

any loss or damage to Lender arising from the loss of Lender’s perfection or priority of its security interest in personal property or fixtures covered under any UCC financing statement due to borrower’s failure to notify Lender as provided for in paragraph 1(h) of the Mortgage.

Notwithstanding anything contained in paragraphs 9(a)(i) and 9(c) hereinabove as it relates solely to taxes, assessments and insurance premiums, to the extent Lender is impounding for taxes, assessments and insurance premiums in accordance with the Loan Documents and Borrower has fully complied with all terms and conditions of the Loan Documents relating to impounding for the same, then Borrower shall not be personally liable for Lender's failure to apply any of said impound amounts held by Lender in accordance with the Loan Documents.

Notwithstanding anything to the contrary in the Loan Documents, the limitation on liability contained in the first paragraph of this paragraph 9 SHALL BECOME NULL AND VOID and shall be of no further force and effect in the event:

(y)

of any breach or violation of paragraph 2(f) (due on sale or encumbrance) of the Mortgage, other than (i) the filing of a nonmaterial mechanic's lien affecting the Premises or a mechanic's lien affecting the Premises for which Borrower has complied with the provisions of paragraph 1(e) of the Mortgage, or (ii) the granting of any utility or other nonmaterial easement or servitude burdening the Premises, or (iii) any transfer or encumbrance of a nonmaterial economic interest in the Premises not otherwise set forth in (i) or (ii), or (iv) an immaterial breach or violation of the Property Transfer Requirements, Ownership Transfer Requirements, Specific Transfer Requirements I-V or the Mezzanine Financing Requirements; or

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(z)

of any filing by Borrower of a petition in bankruptcy or insolvency or a petition or answer seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under the Bankruptcy laws of the United States or under any other applicable federal, state or other statute or law.

10.

If more than one, all obligations and agreements of Borrower are joint and several.

11.

This Note may not be changed or terminated orally, but only by an agreement in writing and signed by the party against whom enforcement of any waiver, change, modification or discharge is sought.  All of the rights, privileges and obligations hereunder shall inure to the benefit of the heirs, successors and assigns of Lender and shall bind the heirs and permitted successors and assigns of Borrower.  

12.

If any provision of this Note shall, for any reason, be held to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision hereof, but this Note shall be construed as if such invalid or unenforceable provision had never been contained herein.

13.

This Note may be executed in counterparts, each of which shall be deemed an original; and such counterparts when taken together shall constitute but one agreement.

14.

This provision does not represent a commitment by Lender to lend additional dollars (the "Additional Advance") to Borrower, as Lender is under no obligation to make an Additional Advance. Borrower may request Lender to fund to Borrower an additional advance of principal ("Request for Advance"), provided the requested Additional Advance, in combination with the original Loan, meet certain "Minimum Economic Criteria" (set forth below).    

If Lender does choose to make an Additional Advance, the following conditions precedent must be satisfied:

The "Minimum Economic Criteria" are:

(a)

The combined outstanding Indebtedness on the original Loan and the Additional Advance does not exceed seventy-seven percent (77%) of the appraised value of the Premises as established by an appraisal of the Premises prepared by an MAI appraiser approved by Lender and in form and substance acceptable to Lender, said appraisal at Borrower's cost;

(b)

Debt service of coverage of 1.20 times the annual debt service on the combined outstanding Indebtedness on the original Loan and the Additional Advance, as determined by Lender.  The debt service coverage shall be the annual net operating income divided by the total annual installment payments due under the combined outstanding Indebtedness on the original Loan and the Additional Advance, including accrued or capitalized interest.  Only net operating income from approved executed Leases in effect

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on the Premises with no uncured defaults shall be used in Lender's determination of the foregoing.  Borrower shall provide a certified rent roll with its Request for Advance; and

(c)

At the time of the Request for Advance, at least twelve (12) months must remain in the Loan term.

Provided no Event of Default exists under the Loan Documents, if Lender determines that the Minimum Economic Criteria are satisfied, Lender may notify Borrower in writing ("Lender's Notice") of the number of basis points ("Spread") and the United States Treasury Issue ("Treasury Issue") that Lender will use to establish the interest rate applicable to the Additional Advance ("AA Interest Rate").  The Spread shall be determined by the Lender, in its sole discretion.

At any time and from time to time before the date that the AA Interest Rate is agreed to, provided at least seven (7) days have elapsed since the previous Lender's Notice, Lender may establish a new Spread which Lender anticipates it will use to establish the AA Interest Rate and notify Borrower of the same.  The AA Interest Rate must be established by the date which is 30 days following the date of the initial Lender's Notice (the "AA Rate Set Deadline").  The AA Interest Rate may only be established on a date mutually agreed to by Lender and Borrower. If Borrower fails to respond to the most current Lender's Notice in writing by the AA Rate Set Deadline, all of the Lender's Notices shall be deemed rejected.  If Borrower rejects the terms set forth in the Lender's Notice, Borrower shall then have the right to obtain Mezzanine Financing on the terms set forth in the Mortgage.  If Borrower accepts the terms set forth in Lender's Notice, Lender shall agree to fund the Additional Advance, provided the following closing conditions ("Closing Conditions") are met:

(a)

Borrower's execution, delivery, acknowledgement and recordation, as applicable, of acceptable documentation evidencing and securing the Additional Advance including, but not limited to, additional note(s), revised and/or replacement loan modification agreements, indemnification agreements, escrow security or property reserve agreements, security instruments, financing statements, UCCs, new or revised letters of credit and/or guarantees in form and substance satisfactory to Lender;

(b)

Receipt of either (at Lender's discretion) a new ALTA standard loan policy or an endorsement updating the Lender's existing loan policy in the full amount of the Loan (as increased by the Additional Advance), in form and by an issuer satisfactory to Lender, and which insures the Mortgage to be a first and prior lien subject only to those exceptions which were previously approved by Lender and provides coverage against usury and mechanic's liens (an acceptable usury opinion can be substituted for the usury coverage);

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(c)

Compliance with Lender's then current underwriting and closing due diligence requirements.

(d)

Receipt of acceptable third party reports addressing property physical and environmental condition, upon request of Lender, prepared by consultants acceptable to Lender;

(e)

Payment by Borrower of all third party expenses incurred, including but not limited to outside counsel fees and costs;

(f)

Payment of Borrower of an "Additional Advance Fee" equal to .5% of the amount of the Additional Advance.  The Additional Advance Fee is non-refundable and is due upon Borrower's acceptance of the terms set forth in the Lender's Notice.

In the event (i) Lender does not choose to make the Additional Advance; (ii) Borrower rejects the terms set forth in the Lender's Notice, or (iii) Borrower is unable to satisfy the Closing Conditions, Borrower shall have the ability to obtain Mezzanine Financing as more particularly described in paragraph 2(f) of the Mortgage.

(Signatures on next page)

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IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed and delivered as of the date first set forth above.

VMS NATIONAL PROPERTIES, an Illinois general partnership

By:

VMS NATIONAL RESIDENTIAL PORTFOLIO I, an Illinois limited partnership

By:

MAERIL, INC., a Delaware  

                        corporation, its general partner

       By: /s/Patti K. Fielding

       Name:  Patti K. Fielding

                Title:  Executive Vice President  

and Treasurer

By:

VMS NATIONAL RESIDENTIAL PORTFOLIO II, an Illinois limited partnership

By:

MAERIL, INC., a Delaware  

                        corporation, its general partner

       By: /s/Patti K. Fielding

       Name:  Patti K. Fielding

                Title:  Executive Vice President  

                           and Treasurer

EX-10

Exhibit 10.20

Record and return to:

Principal Life Insurance Company

c/o Principal Real Estate Investors, LLC

801 Grand Avenue

Des Moines, IA  50392-1360

ATTN:  Erin Coghlan

DEED OF TRUST, SECURITY AGREEMENT

ASSIGNMENT OF RENTS AND FIXTURE FILING

THE NOTE SECURED BY THIS DEED OF TRUST CONTAINS AN

ADJUSTABLE INTEREST RATE

755503

A.

THIS DEED OF TRUST, SECURITY AGREEMENT AND ASSIGNMENT OF RENTS AND FIXTURE FILING (as the same may from time to time hereafter be modified, supplemented or amended, this "Deed of Trust") is made as of January 19, 2007, by and between VMS NATIONAL PROPERTIES, an Illinois general partnership, having its principal place of business and post office address at 4582 South Ulster Street Parkway, Suite 1100, Denver, Colorado 80237, as "Borrower" ("Borrower" to be construed as "Borrowers" if the context so requires), Brenda S. Tyler, of 801 Grand Avenue, Des Moines, Iowa, as "Trustee", and PRINCIPAL LIFE INSURANCE COMPANY, an Iowa corporation, as "Lender".

WITNESSETH:

B.

Borrower is justly indebted to Lender for money borrowed (the "Loan") in the original principal sum of Twenty-three Million Eight Hundred Thousand and 00/100 Dollars ($23,800,000.00) (the "Loan Amount") evidenced by Borrower's secured promissory note of even date herewith, made payable and delivered to Lender (as may be modified, amended, supplemented, extended or consolidated in writing and any note(s) issued in exchange therefor or replacement thereof) (the "Note"), in which Note Borrower promises to pay to Lender the Loan Amount, together with all accrued and unpaid interest thereon, interest accrued at the Default Rate (if any), Late Charges (if any), the Make Whole Premium (if any), and all other obligations and liabilities due or to become due to Lender pursuant to the Loan Documents and all other amounts, sums and expenses paid by or payable to Lender pursuant to the Loan Docume nts and the Environmental Indemnity (collectively the "Indebtedness") until the Indebtedness has been paid, but in any event, the unpaid balance (if any) remaining due on the Note shall be due and payable on February 1, 2012 (the "Maturity Date") or such earlier date resulting from the

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acceleration of the Indebtedness by Lender.  Capitalized terms used herein and not otherwise defined shall have those meanings given to them in the other Loan Documents.

C.

NOW, THEREFORE, to secure the payment of the Indebtedness in accordance with the terms and conditions of the Loan Documents, and all extensions, modifications, and renewals thereof and the performance of the covenants and agreements contained therein, and also to secure the payment of any and all other Indebtedness, direct or contingent, that may now or hereafter become owing from Borrower to Lender in connection with the Loan Documents, and in consideration of the Loan Amount in hand paid, receipt of which is hereby acknowledged, Borrower does by these presents irrevocably grant, transfer and assign in trust with power of sale and right of entry and possession unto Trustee, its successors and assigns forever, that certain real estate and all of Borrower's estate, right, title and interest therein, located in the county of Alameda, state of California, more particularly described in Exhibit A attached hereto and made a part hereof (the "Land"), which Land, together with the following described property, rights and interests, is collectively referred to herein as the "Premises".

D.

Together with Borrower's interest as lessor in and to all Leases and all Rents, which are pledged primarily and on a parity with the Land and not secondarily.

E.

Together with all and singular the tenements, hereditaments, easements, appurtenances, passages, waters, water courses, riparian rights, direct flow, ditch, reservoir, well and other water rights, whether or not adjudicated, whether tributary or nontributary and whether evidenced by deed, water stock, permit or otherwise, sewer rights, rights in trade names, licenses, permits and contracts, and all other rights, liberties and privileges of any kind or character in any way now or hereafter appertaining to the Land, including but not limited to, homestead and any other claim at law or in equity as well as any after-acquired title, franchise or license and the reversion and reversions and remainder and remainders thereof.

F.

Together with the right in the case of foreclosure hereunder of the encumbered property for Lender to take and use the name by which the buildings and all other improvements situated on the Premises are commonly known and the right to manage and operate the said buildings under any such name and variants thereof.

G.

Together with all right, title and interest of Borrower in any and all buildings and improvements of every kind and description now or hereafter erected or placed on the said Land and all materials intended for construction, reconstruction, alteration and repairs of such buildings and improvements now or hereafter erected thereon, all of which materials shall be deemed to be included within the Premises immediately upon the delivery thereof to the Premises, and all fixtures now or hereafter owned by Borrower and attached to or contained in and used exclusively in connection with the Premises including, but not limited to, all machinery, motors, elevators, fittings, radiators, awnings, shades, screens, all gas and electric fixtures, appliances (including without limitation, ranges, rangetops, ovens, stoves, cooking apparatus and appurtenances, dishwashers, refrigerators, trash compactors, microwaves, washers, dryers, and garbage disposa ls), water heaters, mirrors, mantels, carpeting and all other floor coverings,

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window coverings and treatments, cable television equipment, water softeners, storm sashes, and all plumbing, heating, lighting, ventilating, refrigerating, incinerating, air-conditioning and sprinkler equipment and fixtures and appurtenances thereto; and all items of furniture, furnishings, equipment and personal property owned by Borrower used exclusively in the operation of the Premises; and all renewals or replacements of all of the aforesaid property owned by Borrower or articles in substitution therefor, whether or not the same are or shall be attached to said buildings or improvements in any manner (collectively, the "Improvements"); it being mutually agreed, intended and declared that all the aforesaid property owned by Borrower and placed by it on the Land or used exclusively in connection with the operation or maintenance of the Premises shall, so far as permitted by law, be deemed to form a part and parcel of the Land and for the purpose of this Deed of Trust to be Land and covered by this Deed of Trust, and as to any of the property aforesaid which does not form a part and parcel of the Land or does not constitute a "fixture" (as such term is defined in the Uniform Commercial Code ("UCC")), this Deed of Trust and the other Loan Documents (the terms of which grant a security interest in personal property or real property, the proceeds of which may become personal property) are each hereby deemed to be, as well, a security agreement under the UCC for the purpose of creating a security interest in all items, including, but not limited to, all property and rights which Borrower may grant, assign, bargain, sell, transfer, set over, deliver, or otherwise convey to Lender, as secured party, under the terms of this Deed of Trust or any of the other Loan Documents, including any and all proceeds thereof (as used herein, Borrower shall mean "Debtor" under the UCC and Lender shall mean "Secured Party&quo t; under the UCC).  Borrower hereby appoints Lender as its attorney-in-fact to execute such documents necessary to perfect Lender's security interest and authorizes Lender at any time until the Indebtedness is paid in full, to prepare and file, at Borrower's expense, any and all UCC financing statements, amendments, assignments, terminations and the like, necessary to create and/or maintain a prior security interest in such property all without Borrower's execution of the same.  Furthermore, upon a default under the Loan Documents, Lender will, in addition to all other remedies provided for in the Loan Documents, have the remedies provided for under the UCC in effect in the state in which the Premises is located.

H.

Together with all right, title and interest of Borrower, now or hereafter acquired, in and to any and all strips and gores of land adjacent to and used in connection with the Premises and all right, title and interest of Borrower, now owned or hereafter acquired, in, to, over and under the ways, streets, sidewalks and alleys adjoining the Premises.  

I.

Together with all funds now or hereafter held by Lender under any property reserves agreement (including any proceeds derived from any letter of credit) or escrow security agreement or under any of the terms hereof or of the Loan Documents, including but not limited to funds held under the provisions of paragraph 5 hereof.

J.

Together with all of Borrower's payment intangibles, letter of credit rights, interest rate cap agreements, tenant in common agreement rights, and any other contract rights of Borrower related in any manner to the ownership, operation, or management of the Premises, as well as any

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and all supporting obligations, and all proceeds, renewals, replacements and substitutions thereof.

K.

Together with all funds, accounts and proceeds thereof relating to the Premises whether or not such funds, accounts or proceeds thereof are held by Lender under the terms of any of the Loan Documents, including, but not limited to bankruptcy claims of Borrower against any tenant at the Premises, and any proceeds thereof; proceeds of any Rents, insurance proceeds from all insurance policies required to be maintained by Borrower under the Loan Documents and all awards, decrees, proceeds, settlements or claims for damage now or hereafter made to or for the benefit of Borrower by reason of any damage to, destruction of or taking of the Premises or any part thereof, whether the same shall be made by reason of the exercise of the right of eminent domain or by condemnation or otherwise (a "Taking").

L.

TO HAVE AND TO HOLD the same unto Trustee, Trustee's successors and assigns, upon the trusts, covenants and agreements herein expressed.  

M.

Borrower represents that it is the absolute owner in fee simple of the Premises described in Exhibit A, which Premises are free and clear of any liens or encumbrances except as set forth in the loan policy of title insurance for the Premises issued to Lender, and except for taxes which are not yet due or delinquent.  Borrower shall forever warrant and defend the title to the Premises against all claims and demands of all persons whomsoever and will on demand execute any additional instrument which may be required to give Trustee a valid first lien on all of the Premises, subject to the "Permitted Encumbrances" set forth in the loan policy of title insurance for the Premises issued to Lender.  

N.

Borrower further represents that (i) the Premises is not subject to any casualty damage; (ii) Borrower has not received any written notice of any eminent domain or condemnation proceeding affecting the Premises; (iii) all leasing broker fees and commissions payable by Borrower with respect to the Lease(s) have been paid in full, in cash or other form of immediately available funds; (iv) to the best of Borrower's knowledge, following due and diligent inquiry, there are no actions, suits or proceedings pending, completed or threatened against or affecting Borrower or any person or entity owning an interest (directly or indirectly) in Borrower ("Interest Owner(s)") or any property of Borrower or any Interest Owner in any court or before any arbitrator of any kind or before or by any governmental authority (whether local, state, federal or foreign) that, individually or in the aggregate, could reasonably be expected by Len der to be material to the transaction contemplated hereby and (v) the Premises and the intended uses thereof are in compliance with all applicable laws, regulations and ordinances, including without limitation, the Americans with Disabilities Act of 1990 (42 U.S.C. §12101, et seq.), the Federal Architectural Barriers Act (42 U.S.C. §3601, et seq.), the Fair Housing Amendments Act of 1988 (42 U.S.C. §3601, et seq.), and the Rehabilitation Act of 1973 (29 U.S.C. §794) and any amendments, modifications or supplements thereto.

-5-

O.

Borrower further represents and warrants that as of the date hereof and until the Indebtedness is paid in full

(a)

Borrower and each person or entity owning an interest in Borrower is not and will not be (i) identified on the Specially Designated Nationals and Blocked Persons List maintained by the Office of Foreign Assets Control, Department of the Treasury ("OFAC") and/or on any other similar list maintained by OFAC pursuant to any authorizing statute, executive order or regulation (collectively, the "List"), (ii) a person or entity with whom a citizen of the United States is prohibited to engage in transactions by any trade embargo, economic sanction, or other prohibition of United States law, regulation, or Executive Order of the President of the United States;

(b)

none of the funds or other assets of Borrower constitute or will constitute property of, or are or will be beneficially owned, directly or indirectly, by any Embargoed Person (as hereinafter defined);

(c)

no Embargoed Person has or will have any interest of any nature whatsoever in Borrower (whether directly or indirectly);

(d)

none of the funds of Borrower have been or will be derived from any unlawful activity with the result that the investment in Borrower is prohibited by law or that the Loan Documents are in or will be in violation of law,

(e)

Borrower has and will continue to implement procedures, and has consistently and will continue to consistently apply those procedures, to ensure the foregoing representations and warranties remain true and correct at all times.  The term "Embargoed Person" means any person, entity or government subject to trade restrictions under U.S. law, including but not limited to, the International Emergency Economic Powers Act, 50 U.S.C. §1701 et seq., The Trading with the Enemy Act, 50 U.S.C. App. 1 et seq., and any Executive Orders or regulations promulgated thereunder with the result that the investment in Borrower is prohibited by law or Borrower is in violation of law;

(f)

Borrower has complied and will continue to comply with all requirements of law relating to money laundering, anti-terrorism, trade embargos and economic sanctions, now or hereafter in effect;

(g)

Borrower has not and will not use funds from any "Prohibited Person" (as such term is defined in the September 24, 2001 Executive Order Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism) to make any payment due to Lender under the Loan Documents

-6-

Borrower will immediately notify Lender in writing if any of the representations, warranties or covenants are no longer true or have been breached or if Borrower has a reasonable basis to believe that they may no longer be true or have been breached.  In addition, Borrower will, at the request of Lender, provide such information as may be requested by Lender to determine Borrower's compliance with the terms hereof.

P.

Borrower further represents and warrants that as of the date hereof and until the Indebtedness is paid in full: (i) Borrower is not and will not be an "employee benefit plan" as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), which is subject to Title I of ERISA; (ii) the assets of Borrower do not and will not constitute "plan assets" of one or more such plans for purposes of Title I of ERISA; (iii) Borrower is not and will not be a "governmental plan" within the meaning of Section 3(32) of ERISA; (iv) transactions by or with Borrower are not and will not be subject to state statutes applicable to Borrower regulating investments of and fiduciary obligations with respect to governmental plans; (v) Borrower has made and will continue to make all required contributions to all employee benefit plans, if any, established for or on behalf of Borrower or to which Borrower is required to contribute; (vi) Borrower has and will continue to administer each such plan, if any, in accordance with its terms and the applicable provisions of ERISA and any other federal or state law; and (vii) Borrower has not and will not permit any liability under Sections 4201, 4243, 4062 or 4069 of Title IV of ERISA or taxes or penalties relating to any employee benefit plan or multi-employer plan to become delinquent or assessed, respectively, which would have a material adverse effect upon (i) the business or the financial position or results of operation of Borrower, (ii) the ability of Borrower to perform, or of Lender to enforce, any of the Loan Documents or Environmental Indemnity, or (iii) the value of the Premises.

BORROWER COVENANTS AND AGREES AS FOLLOWS:  

1.

Borrower shall

(a)

pay each item of Indebtedness secured by this Deed of Trust when due according to the terms of the Loan Documents;

(b)

pay a Late Charge on any payment of principal, interest, Make Whole Premium or Indebtedness which is not paid on or before the due date thereof to cover the expense involved in handling such late payment;

(c)

pay on or before the due date thereof any indebtedness permitted to be incurred by Borrower pursuant to the Loan Documents and any other claims which could become a lien on the Premises (unless otherwise specifically addressed in paragraph 1(e) hereof), and upon request of Lender exhibit satisfactory evidence of the discharge thereof;

(d)

complete within a reasonable time, the construction of any Improvements now or at any time in process of construction upon the Land;

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(e)

manage, operate and maintain the Premises and keep the Premises, including but not limited to, the Improvements, in good condition and repair and free from mechanics' liens or other liens or claims for liens, provided however, that Borrower may in good faith, with reasonable diligence and upon written Notice to Lender within thirty (30) days after Borrower has knowledge of such lien or claim, contest the validity or amount of any such lien or claim and defer payment and discharge thereof during the pendency of such contest in the manner provided by law, provided that (i) such contest may be made without the payment thereof; (ii) such contest shall prevent the sale or forfeiture of the Premises or any part thereof, or any interest therein, to satisfy such lien or claim; (iii) Borrower shall have obtained a bond over such lien or claim from a bonding company acceptable to Lender which has the effect of removing such lien or collection of the claim or lien so contested; and (iv) Borrower shall pay all costs and expenses incidental to such contest; and further provided, that in the event of a final, non-appealable ruling or adjudication adverse to Borrower, Borrower shall promptly pay such claim or lien, shall indemnify and hold Lender and the Premises harmless from any loss or damage arising from such contest and shall take whatever action necessary to prevent sale, forfeiture or any other loss or damage to the Premises or to the Lender;  

(f)

comply, and cause each lessee or other user of the Premises to comply, with all requirements of law and ordinance, and all rules and regulations, now or hereafter enacted, by authorities having jurisdiction of the Premises and the use thereof, including but not limited to all covenants, conditions and restrictions of record pertaining to the Premises, the Improvements, and the use thereof (collectively, "Legal Requirements");

(g)

subject to the provisions of paragraph 6 hereof, promptly repair, restore or rebuild any Improvements now or hereafter a part of the Premises which may become damaged or be destroyed by any cause whatsoever, so that upon completion of the repair, restoration and rebuilding of such Improvements, there will be no liens of any nature arising out of the construction and the Premises will be of substantially the same character and quality as it was prior to the damage or destruction;

(h)

if other than a natural person, do all things necessary to preserve and keep in full force and effect its existence, franchises, rights and privileges under the laws of the state of its formation and, if other than its state of formation, the state where the Premises is located.  Borrower shall notify Lender at least thirty (30) days prior to (i) any relocation of Borrower's principal place of business to a different state or any change in Borrower's

-8-

state of formation, and/or (ii) if Borrower is an individual, any relocation of Borrower's principal residence to a different state;

(i)

do all things necessary to preserve and keep in full force and effect Lender's title insurance coverage insuring the lien of this Deed of Trust as a first and prior lien, subject only to the Permitted Encumbrances stated in the title insurance policy issued to Lender and any other exceptions after the date of this Deed of Trust approved in writing by Lender, including without limitation, delivering to Lender not less than 30 days prior to the effective date of any rate adjustment, modification or extension of the Note or any other Loan Document, any new policy or endorsement which may be reasonably required to assure Lender of such continuing coverage;

(j)

execute any and all documents which may be required to perfect the security interest granted by this Deed of Trust; and

(k)

comply and cause the Premises and the intended uses thereof to comply with all laws, rules, and regulations affecting the Premises or any portion thereof or any use thereof and, upon request by Lender, provide Lender with such evidence as may be reasonably required by Lender to confirm such compliance, such evidence to include, without limitation, letters, licenses, permits, certificates and other correspondence from the appropriate governmental authorities, and opinions or certifications from architects or engineers.  The laws, regulations and ordinances with which compliance should be evidenced include, in addition to the foregoing and without limitation, the following:  building codes, health and environmental protection laws, erosion control ordinances, federal statutes, doing business and/or licensing laws and zoning laws (the evidence submitted as to zoning should include the zoning designation made for the Premises, the permitted uses of the Premises under such zoning designation and zoning requirements as to parking, lot size, ingress, egress and building setbacks).

(l)

deliver to Lender, at Borrower’s expense, on March 1, 2009, a mold investigation report prepared by a consultant acceptable to Lender which, among other things, details the then current condition of the Premises with regard to any allergen, irritant, mold, fungus, bacteria, contaminate or similar substance or material as well as current and historic compliance of the Premises with the AIMCO Risk Management Mold and Mildew Guidelines dated June 24, 2003.  The mold investigation report shall be subject to Lender’s review and approval.

(m)

in the event Permitted Transfer (viii) of paragraph 2(f) occurs, remain a Single-Asset Entity;  

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As used herein, the term Single-Asset Entity means:

a corporation, limited or general partnership, limited liability company, or business trust which, at all times until the Indebtedness is paid in full (i) will not have any other assets other than the Premises, cash and marketable securities, and (ii) will not create, assume, incur, guarantee or become liable for debt, obligations, or performance of obligations for the benefit of any other person or entity except for liabilities incurred in the normal operation of the Premises (other than liabilities secured by the Premises).

2.

Borrower shall not:

(a)

except as required by applicable Legal Requirements, construct any building or structure nor make any alteration or addition (other than normal repair and maintenance) to (i) the roof or any structural component of any Improvements on the Premises, or (ii) the building operating systems, including but not limited to, the mechanical, electrical, heating, cooling, or ventilation systems (other than replacement with equal or better quality and capacity), without the prior written consent of Lender not to be unreasonably withheld;

(b)

remove or demolish any material Improvements, or any portion thereof, which at any time constitutes a part of the Premises.

Notwithstanding anything hereinabove to the contrary, Borrower may construct, remove or demolish tenant improvements within the then existing building(s) or other structures to the extent such work is required solely under the terms of any Leases approved by Lender provided (i) no Event of Default exists under the Loan Documents; (ii) the work is completed on a timely basis, in a good, workmanlike, lien-free manner and in accordance with all Legal Requirements, and (iii) such work does not negatively affect the structural integrity of the Improvements or the value of the Premises;

(c)

cause or permit any change to be made in the general use of the Premises without Lender's prior written consent;

(d)

initiate any or acquiesce to a zoning reclassification or material change in zoning without Lender's prior written consent.  Borrower shall use all reasonable efforts to contest any such zoning reclassification or change;

(e)

make or permit any use of the Premises that could with the passage of time result in the creation of any right of use, or any claim of adverse

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possession or easement on, to or against any part of the Premises in favor of any person or entity or the public;

(f)

allow any of the following to occur (unless a Permitted Transfer):

(i)

a Transfer of all or any portion of the Premises or any interest in the Premises;

(ii)

a Transfer of any ownership interest in Borrower or any entity which owns, directly or indirectly, an interest in Borrower at any level of the ownership structure; or

(iii)

in addition to (i) and (ii) above, if the Borrower is a trust, or if a trust owns an interest, directly or indirectly, in any entity which owns an interest in Borrower at any level of the ownership structure, the addition, deletion or substitution of a trustee of such trust.  

If any of such events occur, it shall be null and void and shall constitute an Event of Default under the Loan Documents.

It is understood and agreed that the Indebtedness evidenced by the Note is personal to Borrower and in accepting the same Lender has relied upon what it perceived as the willingness and ability of Borrower to perform its obligations under the Loan Documents and the Environmental Indemnity and as lessor under the Leases of the Premises.  Furthermore, Lender may consent to a Transfer and expressly waive Borrower's covenants contained in this paragraph 2(f), in writing to Borrower; however any such consent and waiver shall not constitute any consent or waiver of such covenants as to any Transfer other than that for which the consent and waiver was expressly granted.  Furthermore, Lender's willingness to consent to any Transfer and waive Borrower's covenants contained in this paragraph 2(f), implies no standard of reasonableness in determining whether or not such consent shall be granted and the same may be based upon what Lend er solely deems to be in its best interest.

For purposes of the Loan Documents, the following terms shall have the respective meanings set forth below:

"Transfer" or "Transferred" shall mean with respect to the Premises, an interest in the Premises, or an ownership interest or interest therein:

(i)

a sale, assignment, transfer, conveyance or other disposition (whether voluntary, involuntary or by operation of law);

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(ii)

the creation, sufferance or granting of any lien, encumbrance, security interest or collateral assignment (whether voluntarily, involuntarily or by operation of law), other than the lien hereof, the leases of the Premises assigned to Lender, the Permitted Encumbrances and those liens which Borrower is contesting in accordance with the provisions of paragraph 1(e);

(iii)

the issuance or other creation of ownership interests in an entity;

(iv)

the reconstitution or conversion from one entity to another type of entity;

(v)

a merger, consolidation, reorganization or any other business combination; or

(vi)

a conversion to or operation of all or any portion of the Premises as a cooperative or condominium form of ownership.

"Permitted Transfer" shall mean:

(i)

a minor (as determined by Lender) conveyance of an interest in the Premises by Borrower, such as a utility easement, and for which Lender has given its prior written consent and imposed such conditions as Lender deems advisable and appropriate;

(ii)

a sale, assignment, transfer or conveyance of all or any portion of the Premises or an interest in the Premises for which Borrower has complied with all of the Property Transfer Requirements;

(iii)

any of the following Transfers for which Borrower has complied with all of the Ownership Transfer Requirements as applicable and Lender has given its prior written consent (and in connection with such consent, Lender may impose any conditions it wishes in its reasonable discretion);

(A)

a sale, assignment, transfer, or conveyance of an ownership interest or interest therein;

(B)

the issuance or other creation of ownership interests in an entity;

(C)

a reconstitution or conversion from one entity to another type of entity;

(D)

a merger, consolidation, reorganization or any other business combination;

(iv)

transfers of general partner interest in Borrower between VMS National Residential Portfolio I and VMS National Residential Portfolio II ("Borrower Interest Owners") for which Borrower has complied with all of the Specific Transfer Requirements I;

(v)

transfers of general partner interests in Borrower that represent less than 49%, individually or in the aggregate, of all ownership interests in Borrower to individuals or entities other than Borrower

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Interest Owners for which Borrower has complied with all of the Specific Transfer Requirements II;

(vi)

Borrower's right to obtain mezzanine financing for which Borrower has complied with all the Mezzanine Financing Requirements;

(vii)

any assumption of less than 100% of the limited partnership interests in Borrower Interest Owners by any affiliate of AIMCO REIT for which Borrower has complied with all of the Specific Transfer Requirements III;

(viii)

conversion of the Borrower to a Single Asset Entity (as defined in paragraph 1(l)) wholly owned by AIMCO REIT and/or AIMCO OP and transfer of the Premises to said Single Asset Entity for which Borrower has complied with all of the Specific Transfer Requirements IV;

(ix)

a transfer of any general partnership interest in Borrower to a Qualified REIT Subsidiary, as defined in Section 856(i)(2) of the Internal Revenue Code of 1986, 100% owned by AIMCO REIT or to a Qualified REIT Subsidiary, as defined in Section 856(e)(1) of the Internal Revenue Code of 1986, 100% owned by AIMCO OP for which Borrower has complied with all of the Specific Transfer Requirements V;

(ix)

a transfer of shares of common stock, limited partnership interests or other beneficial or ownership interests or other forms of securities in AIMCO REIT or AIMCO OP (defined below), and the issuance of all varieties of convertible debt, equity and other similar securities of AIMCO REIT or AIMCO OP, and the subsequent transfer of such securities; provided, however, that no Change of Control (defined below) occurs as a result of such transfer, either upon such transfer or upon the subsequent conversion to equity of such convertible debt or other securities.

(x)

The issuance by AIMCO REIT or AIMCO OP of additional common stock, limited partnership interests or other beneficial or ownership interests, convertible debt, equity and other similar securities, and the subsequent transfer of such convertible debt or securities; provided, however, that no Change of Control occurs as the result of such transfer, either upon such transfer or upon the subsequent conversion to equity of such convertible debt or other securities.

(xi)

So long as AIMCO REIT owns 100% of the stock of AIMCO-LP, Inc. and AIMCO-GP, Inc. (and AIMCO-GP, Inc. remains the general partner of AIMCO OP), a transfer of limited partnership interests that results in AIMCO-LP, Inc. owning not less than 50.1% of the limited partnership interests in AIMCO OP.

For purposes of this Permitted Transfer Section, the following terms shall

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be defined as follows:

(A)

"Change of Control" shall mean the earliest to occur of (1) the date an Acquiring Person becomes (by acquisition, consolidation, merger or otherwise), directly or indirectly, the beneficial owner of more than forty percent (40%) of the total Voting Equity Capital of AIMCO REIT then outstanding, or (2) the date on which AIMCO REIT shall cease to hold (whether directly or indirectly through a wholly owned intermediary entity such as AIMCO-LP, Inc. or AIMCO-GP, Inc.) at least 50.1% of the limited partnership interests in AIMCO OP, or (3) the date on which AIMCO REIT shall cease for any reason to hold (whether directly or indirectly) (i) the interests in the Managing General Partner held as of the date of this Deed of Trust (as evidenced by organizational charts and documents submitted to Lender as of such date) and (ii) the Controlling Interest(s) in the Borrower, or (4) the replacement (other than solely by reason of retireme nt at age sixty-five or older, death or disability) of more than 50% (or such lesser percentage as is required for decision making by the board of directors of trustees, if applicable) of the members of the board of directors (or trustee, if applicable) of AIMCO REIT over a one-year period where such replacement shall not have been approved by a vote of at least a majority of the board of directors (or trustees, if applicable) of AIMCO REIT then still in office who either were members of such board of directors (or trustees, if applicable) at the beginning of such one year period or whose election as members of the board of directors (or trustees, if applicable) was previously so approved.

(B)

"Acquiring Person" shall mean a "person" or, group of "persons" within the meaning of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended. However, notwithstanding the foregoing, "Acquiring Person" shall not be deemed to include any member of the Borrower Control Group unless such member has, directly or indirectly, disposed of, sold or otherwise transferred to, or encumbered or restricted (whether by means of voting trust agreement or otherwise) for the benefit of an Acquiring Person, all or any portion of the Voting Equity Capital of AIMCO RElT directly or indirectly owned or controlled by such member or such member directly or

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indirectly votes all or any portion of the Voting Equity Capital of AIMCO REIT, directly or indirectly, owned or controlled by such member for the taking of any action which, directly or indirectly constitutes or would result in a Change of Control, in which event such member of the Borrower Control Group shall be deemed to constitute an Acquiring Person to the extent of the Voting Equity Capital of AIMCO REIT owned or controlled by such member.

(C)

"Borrower Control Group" shall mean a majority of the Board of Directors of AIMCO REIT.

(D)

A "Person" shall mean an individual, an estate, a trust, a corporation, a partnership, a limited liability company or any other organization or entity (whether governmental or private).

(E)

"Security" shall have the same meaning as in Section 2(1) of the Securities Act of 1933, as amended.

(F)

"Controlling Interest(s)" shall mean (i) with respect to a partnership, such majority and/or managing general partner interests which, together with a majority of limited partnership interests if necessary for consent purposes, vest in the holder of such interests the sale power, right and authority to control the day to day operations of the Borrower; including, without limitation, the authority to manage, operate and finance the Premises, (ii) with respect to a corporation, the number of shares which entitle the holder to elect a majority of the board of directors of the Borrower, and (iii) with respect to a limited liability company, such majority and/or managing member interests as vest in the holder of such interests the sole power, right and authority to control the day to day operations of the Borrower; including, without limitation, the authority to manage, operate and finance the Premises.

(G)

"AIMCO REIT" shall mean Apartment Investment and Management Company, a corporation organized and existing under the laws of the State of Maryland.

(H)

"AIMCO OP" shall mean AIMCO Properties, L.P., a limited partnership organized and existing under the laws of the State of Delaware.

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(I)

"Managing General Partner" shall mean the entity executing this Deed of Trust on behalf of the Borrower and/or its successors or assigns in interest.

(J)

"Voting Equity Capital" shall mean securities of any class or classes, the holders of which are ordinarily, in the absence of contingencies, entitled to elect a majority of the board of directors (or Persons performing similar functions).

"Property Transfer Requirements" are all of the following:

1.

Prior review and approval of the proposed purchaser or other transferee and the subject transaction by Lender, at Lender's reasonable discretion.  Review of the proposed purchaser or other transferee and the subject transaction shall encompass various factors, including, but not limited to, the proposed purchaser's or other transferee's creditworthiness, financial strength, and real estate management and leasing expertise as well as the proposed transaction's effect on the Premises, the Borrower, and other security for the Loan;

2.

Payment to Lender of an assumption fee equal to one percent (1%) of the principal balance of the Note; provided, however, that Lender will require up to $15,000.00 of such fee to be paid at the beginning of Lender's review process, and such sum shall be nonrefundable and earned upon receipt by Lender whether or not the transaction is ultimately completed or Lender ultimately approves the proposed purchaser or other transferee;

3.

Receipt, at Borrower's expense, of either (at Lender's discretion) a new ALTA standard loan policy or an endorsement updating the Lender's existing loan policy in the full amount of the Loan, in form and by an issuer satisfactory to Lender, and which insures this Deed of Trust to be a first and prior lien subject only to those exceptions which were previously approved by Lender and provides coverage against usury and mechanic's liens;

4.

Receipt by Lender of copies of all relevant information and documentation relating to or required by Lender in connection with the proposed transfer including but not limited to (a) the organizational documents of the proposed transferee and an opinion of counsel satisfactory to Lender as to its due formation,

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valid existence and authority to enter into and carry out the proposed transaction; (b) the deeds or other instruments of transfer and documents relating to the assignment and assumption of Leases; (c) evidence of compliance with the insurance requirements contained in the Loan Documents; and (d) compliance with such other closing requirements as are customarily imposed by Lender in connection with such transactions;

5.

Execution, delivery, acknowledgment and recordation, as applicable, of new, revised and/or replacement assumption agreements, loan modification agreements, indemnification agreements, escrow security or property reserves agreements, security instruments, financing statements, UCCs, new or revised letters of credit and/or guarantees in form and substance reasonably satisfactory to Lender;

6.

Payment of outside counsel fees and costs, other applicable professional's fees and costs, taxes, recording fees and the like, and any other fees and costs incurred; and

7.

Receipt by Lender of 60 days advance written notice of the proposed Transfer in question.

"Ownership Transfer Requirements" are all of the Property Transfer Requirements which Lender deems appropriate in its reasonable discretion, as well as a reasonable processing fee to be determined by Lender; provided, however, that (i) with respect to item 2 of the Property Transfer Requirements, the 1% fee shall be prorated (subject, however, to a $15,000 minimum) based on Lender's calculation of the effective percentage interest in Borrower transferred, and (ii) item 3 of the Property Transfer Requirements shall be required, at Lender's reasonable discretion, only in the event of (A) a merger, consolidation, reorganization or any other business combination, or (B) a reconstitution or conversion from one entity to another type of entity.

"Specific Transfer Requirements I" are all of the following:  

1.

AIMCO REIT (as defined below) and/or AIMCO OP (as defined below) (collectively) retain 20% indirect ownership interest in and retain management and control of Borrower and there is no change in the management and day-to-day operations at the Premises, unless otherwise approved by Lender;

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2.

Lender receives notice of such transfer within thirty (30) days of the consummation of such transfer; and

3.

Lender receives an organizational chart for Borrower which includes ownership breakdowns for all entity levels and is certified by Borrower as true and correct.

Specific Transfer Requirements II are all of the following:

1.

AIMCO REIT and/or AIMCO OP (collectively) retain 20% indirect ownership interest in and retain management and control of Borrower and there is no change in the management and day-to-day operations at the Premises, unless otherwise approved by Lender;

2.

Lender receives notice of such transfer within thirty (30) days of the consummation of such transfer along with the organizational documents of the transferee;

3.

At Lender's option, Lender receives an acceptable background and credit check, at Borrower's cost, for the proposed transferee if said proposed transferee's interest in Borrower will equal or exceed 20%;

4.

At Lender's option, Lender receives an acceptable OFAC report (research of the Office of Foreign Assets Control "Watched" companies list), at Borrower's cost;

5.

Lender receives an organizational chart for Borrower which includes ownership breakdowns for all entity levels and is certified by Borrower as true and correct; and

6.

Lender receives payment of an assumption fee equal to the greater of: (a) one-half percent (0.5%) of the outstanding principal balance of the Note prorated based on Lender's calculation of the effective percentage interest in Borrower transferred; or (b) $3,000.00.

Specific Transfer Requirements III are all of the following:

1.

AIMCO REIT and/or AIMCO OP (collectively) retain 20% indirect ownership interest in and retain management and control of Borrower and there is no change in the management and day-to-day operations at the Premises, unless otherwise approved by Lender;

2.

Lender receives notice of such transfer within thirty (30) days of the consummation of such transfer;

3.

Lender receives an organizational chart for Borrower which includes ownership breakdowns for all entity levels and is certified by Borrower as true and correct; and

4.

Lender receives a processing fee of $500.00.

Specific Transfer Requirements IV are all of the following:

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1.

Property Transfer Requirements 3-7; and

2.

Lender receives a processing fee of $3,000.00.

Specific Transfer Requirements V are all of the following:

1.

AIMCO REIT and/or AIMCO OP (collectively) retain 20% indirect ownership interest in and retain management and control of Borrower and there is no change in the management and day-to-day operations at the Premises, unless otherwise approved by Lender;

2.

Lender receives notice of such transfer within thirty (30) days of the consummation of such transfer along with the organizational documents of the transferee;

3.

At Lender's option, Lender receives an acceptable background and credit check, at Borrower's cost, for the proposed transferee if said proposed transferee's interest in Borrower will equal or exceed 20%;

4.

At Lender's option, Lender receives an acceptable OFAC report (research of the Office of Foreign Assets Control "Watched" companies list), at Borrower's cost;

5.

Lender receives an organizational chart for Borrower which includes ownership breakdowns for all entity levels and is certified by Borrower as true and correct; and

6.

Lender receives payment of a processing fee of $1,000.00.

"Mezzanine Financing Requirements" are all of the following:

(i)

no Event of Default has occurred under the Loan Documents;

(ii)

the mezzanine borrower may not be Borrower;

(iii)

the mezzanine debt is used solely to reimburse the mezzanine borrower for the costs associated with the repair and/or improvement of the Premises subject to the terms and conditions of the Loan Documents;

(iv)

the combined outstanding Indebtedness on the Loan and proposed mezzanine financing does not exceed eighty percent (80%) of the appraised value of the Premises as calculated by Lender at the time of funding of the mezzanine financing or at Lender's option as established by an appraisal of the Premises prepared by an MAI appraiser approved by Lender and in form and substance acceptable to Lender, which appraisal shall be paid for by Borrower;

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(v)

a minimum of 1.05 debt service coverage, based on a 30-year amortization schedule, is maintained.  The debt service coverage shall be the annual net cash flow (annual net operating income after deduction for tenant improvements, leasing commissions, annual replacement reserves and a management fee) divided by the total annual installment payments due under the Note secured hereby and on any proposed mezzanine financing including accrued or capitalized interest.  Only net operating income from approved executed leases in effect on the Premises with no uncured defaults shall be used in Lender's determination of the annual net cash flow;  

(vi)

the only security for the mezzanine financing is a pledge of ownership interests in Borrower or an owner of Borrower, directly or indirectly and such financing does not encumber nor result in any lien or charge upon or against the Premises or the Rents; and

(vii)

Lender's reasonable approval of the mezzanine lender as well as any successor or assign of mezzanine lender, any of which must be an institutional lender;

(viii)

Lender's reasonable approval of the mezzanine financing loan documents;

(ix)

Execution by the mezzanine lender of an inter-creditor agreement in form and substance acceptable to Lender;

(x)

neither Guarantor nor Borrower may be a guarantor of the mezzanine financing;

(xi)

at Lender's option, if required by the procedures promulgated by any rating agency(s) associated with a securitization transaction, evidence in writing to the effect that such mezzanine financing will not result in a re-qualification, reduction or withdrawal of any rating in effect immediately prior to the obtaining of the mezzanine financing issued in connection with the applicable securitization transaction;

(xii)

Borrower pays to Lender a reasonable fee for the handling and processing of such financing and reimburses Lender for all costs and expenses incurred by Lender, including but not limited to outside counsel fees and costs; and

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(xiii)

the right to obtain mezzanine debt is personal to VMS National Properties and any successor borrower directly or indirectly wholly owned by AIMCO REIT and/or AIMCO OP and may not be exercised by any successor or assign of Borrower other than a successor borrower directly or indirectly wholly owned by AIMCO REIT and/or AIMCO OP.

(g)

allow all or any portion of the Premises to be operated as or converted to a cooperative or condominium form of ownership;

(h)

amend, alter, modify, terminate or assign that certain Property Management Agreement by and between Borrower, and NHPMN Management, LP dated January 1, 2003 as amended by Amendment of Management Agreement dated November 9, 2006, now in existence or any subsequent agreement hereafter entered into with respect to the Premises (the "Property Management Agreement");

(i)

permit the property and leasing manager to assign or sell the Property Management Agreement; or

(j)

replace the current property and leasing manager or Property Management Agreement without the prior consent of Lender.

3.

(a)

Borrower shall pay or cause to be paid when due and before any penalty attaches or interest accrues all general taxes, special taxes, assessments (including assessments for benefits from public works or improvements whenever begun or completed), utility charges, water charges, sewer service charges, common area maintenance charges, if any, vault or space charges and all other like charges against or affecting the Premises or against any property or equipment located on the Premises, or which might become a lien on the Premises, and shall, within 15 days following Lender's request, furnish to Lender a duplicate receipt of such payment.  If any such tax, assessment or charge may legally be paid in installments, Borrower may, at its option, pay such tax, assessment or charge in installments.  

(b)

If Borrower desires to contest any tax, assessment or charge relating to the Premises, Borrower may do so by paying the same in full, under protest, in the manner provided by law; provided, however, that

(i)

if contest of any tax, assessment or charge may be made without the payment thereof, and

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(ii)

such contest shall have the effect of preventing the collection of the tax, assessment or charge so contested and the sale or forfeiture of the Premises or any part thereof or any interest therein to satisfy the same,

then Borrower may in its discretion and upon the giving of written notice to Lender of its intended action and upon the furnishing to Lender of such security or bond as Lender may require, contest any such tax, assessment or charge in good faith and in the manner provided by law.  All costs and expenses incidental to such contest shall be paid by Borrower.  In the event of a ruling or adjudication adverse to Borrower, Borrower shall promptly pay such tax, assessment or charge.  Borrower shall indemnify and save harmless the Lender and the Premises from any loss or damage arising from any such contest and shall, if necessary to prevent sale, forfeiture or any other loss or damage to the Premises or to Lender, pay such tax, assessment or charge or take whatever action is necessary to prevent any sale, forfeiture or loss.  

4.

(a)

Borrower shall at all times keep or cause to be kept in force (i) property insurance insuring all Improvements which now are or hereafter become a part of the Premises for perils covered by a causes of loss-special form insurance policy, including coverage against terrorism and containing replacement cost, ordinance and law and agreed amount endorsements or equivalent coverage; (ii) commercial general liability insurance naming Lender as an additional insured protecting Borrower and Lender against liability for bodily injury or property damage occurring in, on or adjacent to the Premises, with a combined single limit of not less than One Million Dollars ($1,000,000) per occurrence with not less than a Two Million Dollar ($2,000,000) aggregate limit and excess umbrella liability insurance of not less than Fifteen Million Dollars ($15,000,000); (iii) boiler and machinery insurance if the property has a boiler or is an office building; (iv) rental value insurance for the perils specified herein for one hundred percent (100%) of the Rents (including operating expenses, real estate taxes, assessments and insurance costs which are lessee's liability) for a period of twelve (12) months; (v) builders risk insurance during all periods of construction; and (vi) insurance against all other hazards as may be reasonably required by Lender, including, without limitation, insurance against loss or damage by flood.

(b)

All insurance (including deductibles and exclusions) shall be in form, content and amounts reasonably approved by Lender and written by an insurance company or companies approved by Lender and rated A-, class size VIII or better in the most current issue of Best's Insurance Reports and which is licensed to do business in the state in which the Premises are

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located or a governmental agency or instrumentality approved by Lender.  The policies for such insurance shall have attached thereto standard mortgagee clauses in favor of and permitting Lender to collect any and all proceeds payable thereunder and shall include a 30 day (except for nonpayment of premium, in which case, a 10 day) notice of cancellation clause in favor of Lender.  All certificates of insurance (or duplicate originals of policies if requested by Lender) shall be delivered to and held by Lender as further security for the payment of the Note and any other obligations arising under the Loan Documents, with evidence of renewal coverage delivered to Lender at least 30 days before the expiration date of any policy.  Borrower shall not carry or permit to be carried separate insurance, concurrent in kind or form and contributing in the event of loss, with any insurance required in the Loan Documents.

5.

(a)

Upon the occurrence of an Event of Default, Borrower shall deposit with and pay to Lender, on each payment date specified in the Note, sums calculated by Lender for payment of the following as they become due and payable:  (i) the estimated taxes and assessments assessed or levied against the Premises, and (ii) the estimated premiums for insurance required by the Loan Documents, excluding commercial general liability insurance.  Lender shall use such deposits to pay the taxes, assessments and premiums when the same become due.  Borrower shall procure and deliver to Lender, in advance, statements for such charges.  If the total payments made by Borrower under this paragraph exceed the amount of payments actually made by Lender for taxes, assessments and insurance premiums, such excess shall be credited by Lender on subsequent deposits to be made by Borrower.  If, however, the deposits are insufficient to pay t he taxes, assessments and insurance premiums when the same shall be due and payable, Borrower will pay to Lender any amount necessary to make up the deficiency, five (5) business days before the date when payment of such taxes, assessments and insurance premiums shall be due.  If at any time Borrower shall tender to Lender, in accordance with the provisions of the Note secured by this Deed of Trust, full payment of the entire Indebtedness represented thereby, Lender shall, in computing the amount of such Indebtedness, credit to the account of Borrower any balance remaining in the funds accumulated and held by Lender under the provisions of this paragraph.  If there is an Event of Default resulting in a public sale of the Premises, or if Lender otherwise acquires the Premises after an Event of Default, Lender shall apply, at the time of commencement of such proceedings, or at the time the Premises is otherwise acquired, the balance then remaining in the funds accumulated under this paragraph as a cr edit toward any delinquent or accrued taxes and then in such priority as Lender elects to the other Indebtedness.

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(b)

Any funds held under this paragraph shall not constitute any deposit or account of the Borrower or moneys to which the Borrower is entitled upon demand, or upon the mere passage of time.  Lender shall not be required to segregate such deposits and may hold such deposits in its general account or any other account and may commingle such deposits with any other moneys of Lender or moneys which Lender is holding on behalf of any other person or entity.

6.

In the event of any damage to or destruction of the Premises, or any part thereof:

(a)

Borrower will immediately notify Lender thereof in the manner provided in this Deed of Trust for the giving of notices.  Lender shall have the right (which may be waived by Lender in writing) to settle and adjust any claim under such insurance policies required to be maintained by Borrower.  In all circumstances, the proceeds thereof shall be paid to Lender and Lender is authorized to collect and to give receipts therefor.  Borrower agrees and acknowledges that such proceeds shall be held by Lender without any allowance of interest and that in any bankruptcy proceeding of Borrower, all such proceeds shall be deemed to be "Cash Collateral" as that term is defined in Section 363 of the Bankruptcy Code.  Provided that no Event of Default exists, Borrower shall have the right to participate in any settlement or adjustment; provided, however, that any settlement or adjustment where the aggregate amount of suc h proceeds equals or exceeds $500,000 shall be subject to the written approval of Lender, not to be unreasonably withheld.

(b)

Such proceeds, after deducting therefrom any reasonable expenses incurred by Lender in the collection thereof (including but not limited to reasonable attorneys' fees and costs), shall be applied by Lender to pay the Indebtedness secured hereby including, but not limited to the Make Whole Premium, whether or not then due and payable, provided, however, that if no Event of Default exists at the time of such application or the application occurs during the Open Period, no Make Whole Premium shall be due.

Notwithstanding anything hereinabove to the contrary,

(i)

in the event the casualty occurs more than three (3) months prior to the Maturity Date and no Event of Default exists, Lender shall apply such proceeds as follows outlined below; provided, further, that Lender's rights in this subparagraph are subject to Borrower's rights to use such proceeds for rebuilding and restoring the buildings and improvements as may be required or permitted by law in effect at the time of the loss:

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(A)

If the aggregate amount of such proceeds is less than $500,000, Lender shall pay such proceeds directly to Borrower, to be held in trust for Lender and applied to the cost of rebuilding and restoring the Premises.

(B)

If the aggregate amount of such proceeds equals or exceeds $500,000 Lender shall disburse such amounts of the proceeds as Lender reasonably deems necessary for the repair or replacement of the Premises, subject to the conditions set forth in 6(c) below.

(ii)

in the event (x) an Event of Default exists, or (y) the casualty occurs during the last three (3) months prior to the Maturity Date and Lender determines that the repair and restoration of such casualty cannot be completed prior to the Maturity Date, or (z) the conditions set forth in 6(c) are not met, then Lender, in its sole and absolute discretion may either:

(A)

declare the entire Indebtedness to be immediately due and payable, provided, however, that if no Event of Default exists or the loan term is in the Open Period, no Make Whole Premium shall be due.  All proceeds shall be applied toward payment of the Indebtedness in such priority as Lender elects; or

(B)

disburse such proceeds as Lender reasonably deems necessary for the repair or replacement of the Premises subject to those conditions set forth in 6(c) which Lender in its sole and absolute discretion may require.

(c)

(i)

In the event that Borrower is to be reimbursed out of the insurance proceeds or out of any award or payment received with respect to a Taking, Lender shall from time to time make available such proceeds, subject to the following conditions: (a) there continues to exist no Event of Default; (b) the delivery to Lender of satisfactory evidence of the estimated cost of completion of such repair and restoration work and any architect's certificates, waivers of lien, contractor's sworn statements, and other evidence of cost and of payment and of the continued priority of the lien hereof over any potential liens of mechanics and materialmen (including, without limitation, title policy endorsements) as Lender may reasonably require and approve; (c) the time required to complete the repair and restoration work and for the income from the Premises to return to the level it was prior to the loss will not exceed the

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coverage period of the rental value insurance required hereunder; (d) the annual net operating income shall equal or exceed 1.20 times the annual debt service on the Note.  Only net operating income from approved executed Leases in effect on the Premises, with no uncured defaults, shall be used in Lender's determination of the annual net operating income; (e) Lender approves the plans and specifications of such work before such work is commenced if the estimated cost of rebuilding and restoration exceeds 25% of the Indebtedness or involves any structural changes or modifications, which approval shall not be unreasonably withheld; (f) if the amount of any insurance proceeds, award or other payment is insufficient to cover the cost of restoring and rebuilding the Premises, Borrower shall pay such cost in excess of such proceeds, award or other payment before being entitled to reimbursement out of such funds; (g) Borrower pays to L ender a non-refundable processing fee equal to the greater of $5,000.00 or .25% of the amount of such proceeds within sixty (60) days of the occurrence of any such damage or destruction and before Lender disburses any proceeds; and (h) such other conditions to such disbursements, in Lender's reasonable discretion, as would be customarily required by a construction lender doing business in the area where the Premises is located or which are otherwise required by any rating agency rating a securitization transaction with respect to the Loan.

(ii)

No payment made by Lender prior to the final completion of the repair or restoration work shall, together with all payments theretofore made, exceed 90% of the cost of such work performed to the time of payment, and at all times the undisbursed balance of said proceeds shall be at least sufficient to pay for the cost of completion of such work free and clear of all liens.  Any proceeds remaining after payment of the cost of rebuilding and restoration shall be paid to Borrower so long as no Event of Default has occurred and is continuing.

(iii)

Repair and restoration of the Premises shall be commenced promptly after the occurrence of the loss and shall be prosecuted to completion diligently, and the Premises shall be so restored and rebuilt to substantially the same character and quality as prior to such damage and destruction and shall comply with all Legal Requirements.

(d)

Should such damage or destruction occur after foreclosure or sale proceedings have been instituted, the proceeds of any such insurance policy or policies, if not applied in rebuilding or restoration of the

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Improvements, shall be used to pay (i) the Indebtedness then due and owing in the event of a non-judicial sale in such priority as Lender elects, or (ii) the amount due in accordance with any decree of foreclosure or deficiency judgment that may be entered in connection with such proceedings, and the balance, if any, shall be paid to the owner of the equity of redemption if it shall then be entitled to the same, or otherwise as any court having jurisdiction may direct.

7.

In the event of the commencement of a Taking affecting the Premises:

(a)

Borrower shall notify Lender thereof in the manner provided in this Deed of Trust for the giving of notices.  Lender may participate in such proceeding, and Borrower shall deliver to Lender all documents requested by it to permit such participation.

(b)

Borrower shall cause the proceeds of any award or other payment made relating to a Taking, to be paid directly to Lender.  Lender, in its sole and absolute discretion: (i) may apply all such proceeds to pay the Indebtedness in such priority as Lender elects, provided however, that if no Event of Default exists at the time of such application no Make Whole Premium shall be due; or (ii) subject to and in accordance with the provisions set forth in paragraph 6(c) above, may disburse such amounts of the proceeds as Lender reasonably deems necessary for the repair or replacement of the Premises.

Notwithstanding anything herein above to the contrary, provided no Event of Default exists, Lender agrees to disburse the proceeds received from any Inconsequential Taking, as hereinafter defined, to Borrower for the repair and/or replacement of the Premises.  An Inconsequential Taking shall be a Taking which (i) results in less than $100,000 in proceeds; (ii) does not, in Lender's determination, materially or adversely affect the Improvements, parking, access, ingress, egress or use of the Premises; and (iii) does not trigger any rights or options of tenants under the Leases.   

8.

If by the laws of the United States of America or of any state or governmental subdivision having jurisdiction over Borrower or of the Premises or of the Loan evidenced by the Loan Documents or any amendments or modifications thereof, any tax or fee is due or becomes due or is imposed upon Lender in respect of the issuance of the Note hereby secured or the making, recording and registration of this Deed of Trust or otherwise in connection with the Loan Documents, the Environmental Indemnity or the Loan, except for Lender's income or franchise tax, Borrower covenants and agrees to pay such tax or fee in the manner required by such law, and to hold harmless and indemnify Trustee and Lender, their

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successors and assigns, against any liability incurred by reason of the imposition of any such tax or fee.  

9.

(a)

Upon the occurrence of any Event of Default, Lender may, but need not, make any payment or perform any act herein required of Borrower, in any form and manner deemed expedient and may, but need not, make full or partial payments of principal or interest on prior encumbrances, if any, and purchase, discharge, compromise or settle any tax lien or other prior lien or title or claim thereof, or redeem from any tax sale or forfeiture affecting said Premises, or contest any tax or assessment.  All moneys paid for any of the purposes herein authorized and all reasonable expenses paid or incurred in connection therewith, including but not limited to, reasonable attorneys' fees and costs and reasonable attorneys' fees and costs on appeal, and any other money advanced by Lender to protect the Premises and the lien hereof, shall be so much additional Indebtedness secured hereby and shall become immediately due and payable without notice an d with interest thereon at the Default Rate from the date of expenditure or advance until paid.  

(b)

In making any payment hereby authorized relating to taxes or assessments or for the purchase, discharge, compromise or settlement of any prior lien, Lender may make such payment according to any bill, statement or estimate secured from the appropriate public office without inquiry into the accuracy thereof or into the validity of any tax, assessment, sale, forfeiture, tax lien or title or claim thereof or without inquiry as to the validity or amount of any claim for lien which may be asserted.  

10.

If one or more of the following events (herein called an "Event of Default" or "Events of Default" as the context so requires) shall have occurred:  

(a)

failure to pay when due any principal, interest, Make Whole Premium or other Indebtedness, utilities, taxes or assessments or insurance premiums required pursuant to the Loan Documents or the Environmental Indemnity, and such failure shall have continued for 5 days; or

(b)

Borrower, Interest Owner or any guarantor voluntarily brings or acquiesces to any of the following:  (A) any action for dissolution, act of dissolution or dissolution or the like of Borrower, Interest Owner or any guarantor under the Federal Bankruptcy Code as now or hereafter constituted; (B) the filing of a petition or answer proposing the adjudication of Borrower, Interest Owner or any guarantor as a bankrupt or its reorganization or arrangement, or any composition, readjustment, liquidation, dissolution or similar relief with respect to it pursuant to any present or future federal or state bankruptcy or similar law; or (C) the appointment by order of a court

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of competent jurisdiction of a receiver, trustee or liquidator of the Premises or any part thereof or of Borrower, Interest Owner or any guarantor or of substantially all of the assets of Borrower, Interest Owner or any guarantor; or

(c)

one or more of the items set forth in paragraph 10(b) above occur which were either not (i) voluntarily brought by Borrower, Interest Owner or any guarantor or (ii) acquiesced in by Borrower, Interest Owner or any guarantor, and which are not discharged or dismissed within 90 days after the action, filing or appointment, as the case may be; or

With respect to the matters in (b) and (c) above for an Interest Owner only, no Event of Default shall occur until an interested party or Interest Owner asserts a claim or right against Borrower or the Premises which delays or otherwise affects Lender's rights, remedies, or interests granted under the Loan Documents (whether or not such assertion is successful).

(d)

with respect to the matters not described in the other subparagraphs of this paragraph 10, failure to duly observe or perform any covenant, condition or agreement of the Borrower or any guarantor contained in this Deed of Trust, the Guaranty, the Note or the Assignment of Leases from Borrower to Lender or in any other instrument or agreement which evidences or secures the Loan (the "Loan Documents"), but excluding the Environmental Indemnity or in the Environmental Indemnity, and such failure shall have continued for 30 days after Notice specifying such failure is given by Lender to Borrower; or

If any failure to observe or perform under (d) above shall be of such nature that it cannot be cured or remedied within 30 days, Borrower shall be entitled to a reasonable period of time to cure or remedy such failure (not to exceed 90 days following the giving of Notice), provided Borrower commences the cure or remedy thereof within the 30 day period following the giving of Notice and thereafter proceeds with diligence, as determined by Lender, to complete such cure or remedy.  

With respect to the matters in (d), no Event of Default shall occur if the failure to observe or perform will not have a Material Adverse Effect as such term is defined below.

"Material Adverse Effect" means a material adverse effect upon (i) the business or the financial position or results of operation of Borrower, (ii) the ability of Borrower to perform, or of Lender to enforce, any of the Loan Documents or Environmental Indemnity or (iii) the value of (x) the Collateral taken as a whole or (y) the Premises.

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(e)

the failure of Borrower to duly observe or perform any of the covenants, conditions and agreements of the Borrower contained in paragraph 2(f) of this Deed of Trust and to cure such failure within ten (10) days following Borrower’s receipt of Notice of such failure; provided, however, that Borrower shall only be granted said 10 day cure period if the failure to observe or perform is a curable event and the granting of said cure period will not have a Material Adverse Effect; or

(f)

any representation when made by or on behalf of Borrower, Interest Owner or any guarantor regarding the Premises, the making or delivery of any of the Loan Documents or the Environmental Indemnity or in any material written information provided by or on behalf of Borrower, Interest Owner or any guarantor in connection with the Loan shall prove to be untrue or inaccurate in any material respect; or

(g)

the failure of Borrower to give Notice to Lender within 90 days after the death of any individual who is personally liable for any obligation under the Loan Documents or the Environmental Indemnity, as Borrower, indemnitor or guarantor, whether or not such individual had executed the Note or this Deed of Trust; or

(h)

subject to the provisions of paragraph 2(f), the failure of Borrower to provide Lender with an assumption agreement in form and substance and executed by a person(s) or entity(ies) acceptable to Lender in its sole discretion to assume the obligations of any deceased individual who is personally liable for any obligation under the Loan Documents or the Environmental Indemnity, as Borrower, indemnitor or guarantor, whether or not such individual had executed the Note or this Deed of Trust, and such failure shall have continued for 90 days after the death of such individual;

(i)

all or any portion of the Premises is operated as or converted to a cooperative or condominium form of ownership; or

then, in each and every such case, the whole of said principal sum hereby secured shall, at the option of the Lender and without further notice to Borrower, become immediately due and payable together with accrued interest thereon, a Make Whole Premium calculated in accordance with the provisions of the Loan Documents and all other Indebtedness, and whether or not Lender has exercised said option, interest shall accrue on the entire principal balance and any interest or Make Whole Premium or other Indebtedness then due, at the Default Rate until fully paid or if

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Lender has not exercised said option, for the duration of any Event of Default.  

11.

Borrower agrees that if Lender accelerates the whole or any part of the principal sum hereby secured after the occurrence of an Event of Default but outside of the Open Periods, that Borrower shall pay as yield maintenance protection and not as a penalty, a "Make Whole Premium", as defined in the Note.

12.

(a)

Upon the occurrence of any Event of Default, in addition to any other rights or remedies provided in the Loan Documents, at law, in equity or otherwise, Lender shall have the right to cause the Premises or any part thereof to be sold in order to accomplish the object of these trusts and upon demand by Lender, Trustee, without demand on Borrower, shall sell the Premises or such part thereof as Trustee in its sole discretion may deem necessary to accomplish the objects of these trusts having first given notice of the time and place of such sale as required by law for the sale of real property upon execution.

(b)

Trustee may postpone such sale from time to time by giving notice of such postponement in the same manner in which any original notice of sale was given or by an announcement or proclamation made to the persons assembled at the time and place previously appointed and noticed for such sale or postponed sale, and on the date of such sale or the date to which such sale may have been postponed Trustee may sell the Premises to the highest bidder.  Lender or its agents may bid and purchase at such sale.  Trustee in conducting said sale may act either in person or through the agency of an auctioneer and may establish as one of the conditions of such sale that all bids and payments for said Premises be made in cash.

13.

Upon such sale, Trustee shall make, execute, and after due payment is made, deliver to the purchaser or purchasers a deed or deeds for the Premises or part thereof sold and shall apply the proceeds of the sale, at the election of Lender first, to all of the expenses of such sale including the reasonable expenses of this trust or the Trustee and the fees and costs of any attorneys for this trust, environmental audits, the Trustee or Lender, all of which shall accrue and become due from and after any Event of Default, together with any sums which Trustee or Lender shall have paid for procuring any abstract, certificate or report of title to the Premises and, second, to principal, interest and any other Indebtedness and all other sums or amounts due under the Note or agreed or provided to be paid by Borrower herein or in any other Loan Documents, all in such order as Lender may determine.  The remainder of such proceeds, if any, sha ll be paid to Borrower or Borrower's successors or assigns, as their rights may appear.  

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14.

In the event of such a sale of the Premises or any part thereof and the execution of a deed or deeds therefor under these trusts, any recital therein of the occurrence of an Event of Default or of the giving or recording of any notice or demand by Trustee or Lender regarding such sale shall be conclusive proof thereof, and the receipt of the purchase money recited therein shall fully discharge the purchaser from any obligation for the proper application of the proceeds of sale in accordance with these trusts.

15.

Following the occurrence of an Event of Default, unless the same has been specifically waived in writing, Borrower shall forthwith upon demand of Trustee or Lender surrender to Lender possession of the Premises, and Lender shall be entitled to take actual possession of the Premises or any part thereof personally or by its agents or attorneys, and Lender in its discretion may, with or without force and with or without process of law, enter upon and take and maintain possession of all or any part of the Premises together with all documents, books, records, papers and accounts of the Borrower or the then owner of the Premises relating thereto, and may exclude Borrower, its agents or assigns wholly therefrom, and may as attorney-in-fact or agent of the Borrower, or in its own name as Lender and under the powers herein granted:

(a)

hold, operate, maintain, repair, rebuild, replace, alter, improve, manage or control the Premises as it deems judicious, insure and reinsure the same and any risks related to Lender's possession, operation and management thereof and receive all Rents, either personally or by its agents, and with full power to use such measures, legal or equitable, as in its discretion it deems proper or necessary to enforce the payment or security of the Rents, including actions for the recovery of Rent, actions in forcible detainer and actions in distress for Rents, hereby granting full power and authority to exercise each and every of the rights, privileges and powers herein granted at any and all times hereafter, without notice to Borrower; and

(b)

conduct leasing activity pursuant to the provisions of the Assignment of Leases.

Neither Trustee nor Lender shall be obligated to perform or discharge, nor does either hereby undertake to perform or discharge, any obligation, duty or liability under any Lease.  Except to the extent that the same is caused solely by Lender's gross negligence or willful misconduct, should Trustee or Lender incur any liability, loss or damage under any Leases, or under or by reason of the Assignment of Leases, or in the defense of any claims or demands whatsoever which may be asserted against Lender or Trustee by reason of any alleged obligations or undertakings on its part to perform or discharge any of the terms, covenants or agreements in any Lease, the amount thereof, including costs,

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expenses and reasonable attorneys' fees and costs, including reasonable attorneys' fees and costs on appeal, shall be added to the Indebtedness and secured hereby.

16.

Upon the occurrence of an Event of Default, Trustee and Lender in the exercise of the rights and powers conferred upon them shall have the full power to use and apply the Rents, less costs and expenses of collection to the payment of or on account of the items listed in (a) - (c) below, at the election of Lender and in such order as Lender may determine as follows:

(a)

to the payment of (i) the expenses of operating and maintaining the Premises, including, but not limited to the cost of management, leasing (which shall include reasonable compensation to Trustee, Lender and their respective agent or agents if management and/or leasing is delegated to an agent or agents), repairing, rebuilding, replacing, altering and improving the Premises, (ii) premiums on insurance as hereinabove authorized, (iii) taxes and special assessments now due or which may hereafter become due on the Premises, and (iv) expenses of placing the Premises in such condition as will, in the sole judgment of Lender, make it readily rentable;

(b)

to the payment of any principal, interest or any other Indebtedness secured hereby or any deficiency which may result from any foreclosure sale;

(c)

to the payment of established claims for damages, if any, reasonable attorneys' fees and costs and reasonable attorneys' fees and costs on appeal.

The manner of the application of Rents, the reasonableness of the costs and charges to which such Rents are applied and the item or items which shall be credited thereby shall be within the sole and unlimited discretion of Lender.  To the extent that the costs and expenses in (a) and (c) above exceed the amounts collected, the excess shall be added to the Indebtedness and secured hereby.

17.

Upon the occurrence of any Event of Default, unless the same has been specifically waived in writing, Lender may apply to any court having jurisdiction for the appointment of a receiver of the Premises.  Such appointment may be made either before or after sale, without notice, without regard to the solvency or insolvency of Borrower at the time of application for such receiver and without regard to the then value of the Premises or the adequacy of Lender's security.  Lender may be appointed as such receiver.  The receiver shall have power to collect the Rents during the pendency of any foreclosure proceedings and, in case of a sale, during the full statutory period of redemption, if any, as well as during any further times when Borrower, except for the intervention of such receiver, would be entitled to collect such Rents.  In addition, the receiver shall have all other powers which shall be necessary or are usual in such cases for the protection, possession, control, management and operation of the Premises during

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the whole of said period.  The court from time to time may authorize the receiver to apply the net income in its possession at Lender's election and in such order as Lender may determine in payment in full or in part of those items listed in paragraph 16.

18.

(a)

Borrower agrees that all reasonable costs, charges and expenses, including but not limited to, reasonable attorneys' fees and costs, incurred or expended by Trustee or Lender arising out of or in connection with any action, proceeding or hearing, legal, equitable or quasi-legal, including the preparation therefor and any appeal therefrom, in any way affecting or pertaining to the Loan Documents, the Environmental Indemnity, or the Premises, shall be promptly paid by Borrower.  All such sums not promptly paid by Borrower shall bear interest at the Default Rate from the date of such advance and shall be due and payable on demand and, except for sums relating to the Environmental Indemnity, shall be added to the Indebtedness secured hereby.

(b)

Borrower hereby agrees that upon the occurrence of an Event of Default and the acceleration of the principal sum secured hereby pursuant to this Deed of Trust, to the full extent that such rights can be lawfully waived, Borrower hereby waives and agrees not to insist upon, plead, or in any manner take advantage of, any notice of acceleration, any stay, extension, exemption, homestead, marshaling or moratorium law or any law providing for the valuation or appraisement of all or any part of the Premises prior to any sale or sales thereof under any provision of this Deed of Trust or before or after any decree, judgment or order of any court or confirmation thereof, or claim or exercise any right to redeem all or any part of the Premises so sold and hereby expressly waives to the full extent permitted by applicable law on behalf of itself and each and every person or entity acquiring any right, title or interest in or to all or any part of the Premises, all benefit and advantage of any such laws which would otherwise be available to Borrower or any such person or entity, and agrees that neither Borrower nor any such person or entity will invoke or utilize any such law to otherwise hinder, delay or impede the exercise of any remedy granted or delegated to Lender herein but will permit the exercise of such remedy as though any such laws had not been enacted.  Borrower hereby further expressly waives to the full extent permitted by applicable law on behalf of itself and each and every person or entity acquiring any right, title or interest in or to all or any part of the Premises any and all rights of redemption from any sale or any order or decree of foreclosure obtained pursuant to provisions of this Deed of Trust.

19.

In accordance with and subject to the terms and conditions of the Assignment of Leases, Borrower hereby assigns to Lender directly and absolutely, and not merely

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collaterally, the interest of Borrower as lessor under the Leases of the Premises, and the Rents payable under any Lease and/or with respect to the use of the Premises, or portion thereof, including any oil, gas or mineral lease, or any installments of money payable pursuant to any agreement or any sale of the Premises or any part thereof, subject only to a license, if any, granted by Lender to Borrower with respect thereto prior to the occurrence of an Event of Default.  Borrower has executed and delivered the Assignment of Leases which grants to Lender specific rights and remedies in respect of said Leases and governs the collection of Rents thereunder and from the use of the Premises, and such rights and remedies so granted shall be cumulative of those granted herein.  

The collection of such Rents and the application thereof as aforesaid shall not cure or waive any Event of Default or notice of default hereunder or invalidate any act done pursuant to such notice, except to the extent any such Event of Default is fully cured.  Failure or discontinuance of Lender at any time, or from time to time, to collect any such moneys shall not impair in any manner the subsequent enforcement by Lender of the right, power and authority herein conferred on Lender.  Nothing contained herein, including the exercise of any right, power or authority herein granted to Lender, shall be, or be construed to be, an affirmation by Lender of any tenancy, Lease or option, or right to possession otherwise, or an assumption of liability under, or the subordination of the lien or charge of this Deed of Trust to any such tenancy, Lease or option or right to possession otherwise.  Borrower hereby agrees that, in the event Lender exercises its rights as provided for in this paragraph or in the Assignment of Leases, Borrower waives any right to compensation for the use of Borrower's furniture, furnishings or equipment in the Premises for the period such assignment of rents or receivership is in effect, it being understood that the Rents derived from the use of any such items shall be applied to Borrower's obligations hereunder as above provided.  

20.

All rights and remedies granted to Trustee or Lender in the Loan Documents shall be in addition to and not in limitation of any rights and remedies to which it is entitled in equity, at law or by statute, and the invalidity of any right or remedy herein provided by reason of its conflict with applicable law or statute shall not affect any other valid right or remedy afforded to Trustee or Lender.  No waiver of any default or Event of Default under any of the Loan Documents shall at any time thereafter be held to be a waiver of any rights of the Trustee or Lender hereunder, nor shall any waiver of a prior Event of Default or default operate to waive any subsequent Event of Default or default.  All remedies provided for in the Loan Documents are cumulative and may, at the election of Lender, be exercised alternatively, successively or concurrently.  No act of Trustee or Lender shall be construed as an election to proceed under any one provision herein to the exclusion of any other provision or to proceed against one portion of the Premises to the exclusion of any other portion.  Time is of the essence under this Deed of Trust and the Loan Documents.

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21.

By accepting payment of any sum secured hereby after its due date, Lender does not waive its right either to require prompt payment when due of all other sums or installments so secured or to declare a default for failure to pay such other sums or installments.

22.

The usury provisions of paragraph 6 of the Note and the liability provisions of paragraph 9 of the Note are fully incorporated herein by reference as if the same were specifically stated here.

23.

In the event one or more provisions of the Loan Documents shall be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision hereof, and the Loan Documents shall be construed as if any such provision had never been contained herein.  

24.

If the payment of the Indebtedness secured hereby or of any part thereof shall be extended or varied, or if any part of the security be released, all persons now or at any time hereafter liable therefor, or interested in said Premises, shall be held to assent to such extension, variation or release, and their liability and the lien and all provisions hereof shall continue in full force, the right of recourse against all such persons being expressly reserved by Lender notwithstanding such variation or release.  

25.

Upon payment in full of the principal sum, interest and other Indebtedness secured by the Loan Documents, these presents shall be null and void, and Trustee shall release this Deed of Trust and the lien hereof by proper instrument executed in recordable form.  

26.

(a)

Borrower hereby grants to Lender and its respective agents, attorneys, employees, consultants, contractors and assigns an irrevocable license and authorization to enter upon and inspect the Premises and all facilities located thereon at reasonable times.

(b)

In connection with any sale or conveyance of this Deed of Trust, Borrower grants to Lender and its respective agents, attorneys, employees, consultants, contractors and assigns an irrevocable license and authorization to conduct, at Lender's expense, a Phase I environmental audit of the Premises.

(c)

In the event there has been an Event of Default or in the event Lender has formed a reasonable belief, based on its inspection of the Premises or other factors known to it, that Hazardous Materials may be present on the Premises, then Borrower grants to Lender and its respective agents,

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attorneys, employees, consultants, contractors and assigns an irrevocable license and authorization to conduct environmental tests of the Premises, including without limitation, a Phase I environmental audit, subsurface testing, soil and ground water testing, and other tests which may physically invade the Premises or facilities (the "Tests").  The scope of the Tests shall be such as Lender, in its sole but reasonable discretion, determines is necessary to (i) investigate the condition of the Premises, (ii) protect the security interests created under this Deed of Trust, or (iii) determine compliance with Environmental Laws, the provisions of the Loan Documents and the Environmental Indemnity and other matters relating thereto.  Borrower shall pay the reasonable costs of the Tests and upon Borrower’s request, Lender will make available to Borrower the result of the Tests.

(d)

Provided no Event of Default has occurred, Lender will provide Borrower with reasonable notice of Lender's intent to enter, inspect and conduct the Tests provided for in this paragraph.  In addition, Lender shall conduct such inspections and Tests during normal business hours and use reasonable efforts to minimize disruption of lessees' business operations.

The foregoing licenses and authorizations are intended to be a means of protection of Lender's security interest in the Premises and not as participation in the management of the Premises.

27.

Within 15 days after any written request by any party to this Deed of Trust, the requested party shall certify, by a written statement duly acknowledged, the amount of principal, interest and other Indebtedness then owing on the Note, the terms of payment, Maturity Date and the date to which interest has been paid.  Borrower shall further certify whether any defaults, offsets or defenses exist against the Indebtedness secured hereby.  

28.

(a)

Borrower shall furnish to Lender within 120 days after the end of each fiscal year of Borrower, a statement of income and expenses for Borrower’s operation of the Premises for that fiscal year, a statement of changes in financial position of Borrower relating to the Premises for that fiscal year and, when requested by Lender, a balance sheet showing all assets and liabilities of Borrower relating to the Premises as of the end of that fiscal year;

(b)

Borrower shall furnish to Lender within 120 days after the end of each fiscal year of Borrower, and at any other time upon Lender’s request, a rent schedule for the Premises showing the name of each tenant, and for each tenant, the space occupied, the lease expiration date, the rent payable

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for the current month, the date through which rent has been paid, and any related information requested by Lender;

(c)

Borrower shall furnish to Lender within 120 days after the end of each fiscal year of Borrower, and at any other time upon Lender’s request, an accounting of all security deposits held pursuant to all Leases, including the name of the institution (if any) and the names and identification numbers of the accounts (if any) in which such security deposits are held and the name of the person to contact at such financial institution, along with any authority or release necessary for Lender to access information regarding such accounts;

(d)

upon Lender’s request, a balance sheet, a statement of income and expenses for Borrower, a statement of changes in financial position of Borrower for Borrower’s most recent fiscal year, an aged account receivables report and an annual budget; and

(e)

if required by Lender, a statement of income and expense for the Premises for the prior month or quarter.

(f)

Each of the statements, schedules and reports required by Section 28 shall be certified to be complete and accurate by an individual having authority to bind Borrower, and shall be in such form and contain such detail as Lender may reasonably required.  If an Event of Default has occurred and is continuing, Lender may require that the financial statements required by Sections 28(a), 28(b) and 28(c) be audited, but may not require that any other financial statements required by Section 28 be audited.  Certification of a statement by the chief financial officer of the entity that is the subject of the statement or, in the case of a partnership, the chief financial officer of the general partner, will be acceptable to Lender as certification by an individual having authority to bind Borrower.

29.

Each notice, consent, request, report or other communication under this Deed of Trust or any other Loan Document (each a "Notice") which any party hereto may desire or be required to give to the other shall be deemed to be an adequate and sufficient notice if given in writing and service is made by either (i) registered or certified mail, postage prepaid, in which case notice shall be deemed to have been received three (3) business days following deposit to U.S. mail; or (ii) nationally recognized overnight air courier, next day delivery, prepaid, in which case such notice shall be deemed to have been received one (1) business day following delivery to such nationally recognized overnight air courier.  All Notices shall be addressed to Borrower at its address given on the first page hereof, or to Lender at c/o Principal Real Estate Investors, LLC, 801 Grand Avenue, Des Moines, Iowa 50392-1450, Attn:  Commerc ial Real Estate Servicing, Loan No. 755503, or to

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such other place as any party may by written notice to the other parties hereafter designate as a place for service of notice.  Borrower shall not be permitted to designate more than one place for service of Notice concurrently.

30.

Lender, from time to time, may substitute another Trustee in place of the Trustee named herein, to execute the trusts hereby created; and upon such appointment, and without conveyance to the successor trustee, the successor trustee shall be vested with all the title, interest, powers, duties and trusts in the Premises hereby vested in or conferred upon Trustee herein named.  Each such appointment and substitution shall be made by written instrument executed by the Lender containing reference to this Deed of Trust sufficient to identify it, which instrument, when recorded in the office of the County Recorder of the county or counties in which the Premises is situated, shall be conclusive proof of proper appointment of the successor trustee.  The recital or statement, in any instrument executed by Trustee in pursuance of any of said trusts, of the due authorization of any agent of the Trustee executing the same shall for all p urposes be conclusive proof of such authorization.  

31.

Trustee at any time, at Trustee's option, may commence and maintain suit in any court of competent jurisdiction and obtain the aid and direction of said court in the execution by it of the trusts or any of them, herein expressed or contained, and, in such suit, may obtain the orders or decrees, interlocutory or final of said court directing the execution of said trusts, and confirming and approving Trustee's acts, or any of them, or any sales or conveyances made by Trustee, and adjudging the validity thereof, and directing that the purchasers of the property sold and conveyed be let into immediate possession thereof, and providing for orders of court or other process requiring the Sheriff of the county in which said property is situated to place and maintain said purchasers in quiet and peaceable possession of the property so purchased by them, and the whole thereof.  

32.

Borrower has had the opportunity to fully negotiate the terms hereof and modify the draftsmanship of the Loan Documents and the Environmental Indemnity.  Therefore, the terms of the Loan Documents and the Environmental Indemnity shall be construed and interpreted without any presumption, inference, or rule requiring construction or interpretation of any provision of the Loan Documents and the Environmental Indemnity against the interest of the party causing the Loan Documents and the Environmental Indemnity or any portion of it to be drafted.  Borrower is entering into the Loan Documents and the Environmental Indemnity freely and voluntarily without any duress, economic or otherwise.

33.

Borrower, forthwith upon request, at any and all times hereafter, at the expense of Borrower, will cause to be made, executed, acknowledged and delivered to Trustee, any and every deed or assurance in law which Trustee or counsel of

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Trustee shall reasonably advise or require for the more sure, effectual and satisfactory granting and confirming of said Premises unto Trustee.  

34.

Trustee shall not be liable or responsible for its acts or omissions hereunder, except for Trustee's own gross negligence or willful default, or be liable or responsible for any acts or omissions of any agent, attorneys or employee by him employed hereunder, if selected with reasonable care.  

35.

Trustee accepts this trust when this Deed of Trust executed and acknowledged is made a public record as provided by law.  Trustee is not obligated to notify any party hereto of pending sale under any other deed of trust or of any action or proceeding in which Borrower, Lender, or Trustee shall be a party unless brought by Trustee.  

36.

This Deed of Trust and all provisions hereof shall inure to the benefit of the heirs, successors and assigns of Lender and shall bind the heirs and permitted successors and assigns of Borrower.  

37.

This Deed of Trust shall be governed by, and construed in accordance with, the laws of the state of California, without regard to its conflicts of law principles.

38.

As used herein, the term "Default Rate" means a rate equal to the lesser of (i) four percent (4%) per annum above the then applicable interest rate payable under the Note or (ii) the maximum rate allowed by applicable law.

39.

BORROWER AND LENDER EACH KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE, TO THE EXTENT PERMITTED BY LAW, TRIAL BY JURY IN ANY ACTIONS BROUGHT BY BORROWER, TRUSTEE OR LENDER IN CONNECTION WITH THIS DEED OF TRUST, ANY OF THE LOAN DOCUMENTS, THE INDEBTEDNESS SECURED HEREBY, OR ANY OTHER STATEMENTS OR ACTIONS OF LENDER.

40.

This Deed of Trust and the Indebtedness secured hereby is for the sole purpose of conducting or acquiring a lawful business, professional or commercial activity or for the acquisition or management of real or personal property as a commercial investment, and all proceeds of such Indebtedness shall be used for said business or commercial investment purpose.  Such proceeds will not be used for the purchase of any security within the meaning of the Securities Exchange Act of 1934, as amended, or any regulation issued pursuant thereto, including without limitation, Regulations U, T and X of the Board of Governors of the Federal Reserve System.  This is not a purchase money deed of trust where a seller is providing financing to a buyer for the payment of all or any portion of the purchase price, and the Premises secured hereby is not a residence or homestead or used for mining, grazing, agricultural, timber or farming purposes.

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41.

Unless Lender shall otherwise direct in writing, Borrower shall appear in and defend all actions or proceedings purporting to affect the security hereunder, or any right or power of the Lender.  The Lender shall have the right to appear in such actions or proceedings.  Borrower shall save Lender harmless from all reasonable costs and expenses, including but not limited to, reasonable attorneys' fees and costs, and costs of a title search, continuation of abstract and preparation of survey incurred by reason of any action, suit, proceeding, hearing, motion or application before any court or administrative body in and to which Lender may be or become a party by reason hereof.  Such proceedings shall include but not be limited to condemnation, bankruptcy, probate and administration proceedings, as well as any other action, suit, proceeding, right, motion or application wherein proof of claim is by law required to be filed or in which it becomes necessary to defend or uphold the terms of this Deed of Trust or the Loan Documents or otherwise purporting to affect the security hereof or the rights or powers of Lender.  All money paid or expended by Lender in that regard, together with interest thereon from date of such payment at the applicable interest rate shall be additional Indebtedness secured hereby and shall be immediately due and payable by Borrower without notice.

42.

Upon the occurrence of an Event of Default, unless the same has been specifically waived in writing, all Rents collected or received by Borrower shall be accepted and held for Lender in trust and shall not be commingled with the funds and property of Borrower, but shall be promptly paid over to Lender.

43.

If more than one, all obligations and agreements of Borrower are joint and several.

44.

This Deed of Trust may be executed in counterparts, each of which shall be deemed an original; and such counterparts when taken together shall constitute but one agreement.

45.

Borrower shall pay Lender for every Lender statement furnished at Borrower's request the maximum fee allowed by law pursuant to Section 2943 of the Civil Code of California and all amendments thereto, the provisions of which are incorporated herein by reference and made a part hereof.  Such fee shall be computed as of the time said statement is furnished.

46.

Borrower hereby irrevocably authorizes Lender to apply any and all amounts received by Lender in repayment of amounts due under the Loan Documents first to amounts which are not guaranteed pursuant to the terms of any guaranty and then to amounts which are guaranteed pursuant to the terms of any guaranty.  Borrower hereby waives any and all rights it has or may have under Section 2822 of the California Civil Code which provides that if a guarantor is "liable upon only a portion of an obligation and the principal provides partial satisfaction of the

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obligation, the principal may designate the portion of the obligation that is to be satisfied."

47.

Notwithstanding anything to the contrary set forth herein or in any of the Loan Documents, this Deed of Trust shall not secure the following obligations (the "Unsecured Obligations"):  (i) any obligations evidenced by or arising under the Environmental Indemnity; and (ii) any other obligations in this Deed of Trust or in any of the other Loan Documents to the extent that such other obligations relate specifically to the presence on the Premises of Hazardous Materials and are the same or have the same effect as any of the obligations evidenced by or arising under the Environmental Indemnity (excluding the cost of any Tests incurred by Lender hereunder).  Any breach or default with respect to the Unsecured Obligations after the expiration of any applicable cure periods shall constitute an Event of Default hereunder, notwithstanding the fact that such Unsecured Obligations are not secured by this Deed of Trust.

48.

Borrower desires and intends that this Deed of Trust also constitute a fixture filing between Borrower as debtor and Lender as secured party, as defined in the Uniform Commercial Code.  To this end, Borrower acknowledges that (i) this Deed of Trust covers goods which are or are to become fixtures on the Land; (ii) this financing statement is to be recorded; (iii) Borrower is the record owner of such property; and (iv) products of collateral are also covered.  No financing statement in favor of any secured party other than Lender covering the personal property described herein or any portion thereof is on file in any public office.

(Signatures on next page)

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IN WITNESS WHEREOF, Borrower has caused this Deed of Trust to be duly executed and delivered as of the date first above written.   

VMS NATIONAL PROPERTIES, an Illinois general partnership

By:

VMS NATIONAL RESIDENTIAL PORTFOLIO I, an Illinois limited partnership

By:

MAERIL, INC., a Delaware

                        corporation, its general partner

       By: /s/Patti K. Fielding

       Name:  Patti K. Fielding

                Title:  Executive Vice President  

                           and Treasurer

By:

VMS NATIONAL RESIDENTIAL PORTFOLIO II, an Illinois limited partnership

By:

MAERIL, INC., a Delaware

                        corporation, its general partner

       By: /s/Patti K. Fielding

       Name:  Patti K. Fielding

                Title:  Executive Vice President  

                           and Treasurer

EX-10

Exhibit 10.21

GUARANTY

755503

THIS GUARANTY (as the same may from time to time hereafter be modified, supplemented or amended, the "Guaranty") is made as of January 19, 2007, by AIMCO PROPERTIES, L.P., a Delaware limited partnership, having an office at Stanford Place 3, 4582 South Ulster Street Parkway, Suite 1100, Denver, Colorado 80237 ("Guarantor"), in favor of PRINCIPAL LIFE INSURANCE COMPANY, an Iowa corporation ("Lender").

RECITALS:

Lender has agreed to make a loan (the "Loan") in the original principal sum of Twenty Three Million Eight Hundred Thousand and 00/100 Dollars ($23,800,000.00) (the "Loan Amount") to VMS NATIONAL PROPERTIES, an Illinois general partnership ("Borrower"); and

The Loan is evidenced by Borrower's secured promissory note made payable and delivered to Lender (as the same may from time to time hereafter be modified, amended, supplemented, extended or consolidated in writing, and any note(s) issued in exchange therefor or replacement thereof, the "Note") and further evidenced and secured by a "Mortgage" (it being agreed that "Mortgage" as hereinafter used shall be construed to mean "mortgage" or "deed of trust" or "trust deed" or "deed to secure debt" as the context so requires) on certain real estate located in Alameda County, California, together with all existing improvements constructed thereon, said Premises being more particularly described in said Mortgage, and an Assignment of Leases ("Assignment of Leases"); and

In connection with the Loan, the Borrower has also executed that certain Environmental Indemnity ("Environmental Indemnity") for the benefit of Lender (the Note, Environmental Indemnity, Mortgage and Assignment of Leases and all other instruments or agreements by which the Loan is evidenced or secured are hereinafter collectively referred to as the "Underlying Instruments"); and

It is a condition of Lender's agreement to make the Loan that Guarantor be unconditionally liable for and personally guarantee the payment and performance of certain liabilities and obligations of the Borrower under the Underlying Instruments upon the terms and conditions as are hereinafter set forth and except for such liabilities and obligations described herein, Guarantor shall have no liability in connection with, or responsibility to perform, under or in accordance with the Underlying Instruments; and

WHEREAS, Guarantor is financially interested in Borrower and is materially benefited by the consummation of the Loan and has agreed to unconditionally and personally guarantee the payment and performance of certain liabilities and obligations of Borrower under the Underlying Instruments upon the terms and conditions as are hereinafter set forth.

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NOW, THEREFORE, in order to induce Lender to make the Loan to Borrower, Guarantor intending to be legally bound, hereby makes the following representations and warranties to the Lender and hereby covenants and agrees with the Lender as follows:

1.

Guarantor absolutely, irrevocably and unconditionally guarantees to the Lender payment and the full, faithful and timely performance of any and all liabilities and obligations of Borrower whether now existing or hereafter incurred under the Environmental Indemnity and paragraph 9 of the Note (all of which payments, liabilities and obligations are hereinafter collectively referred to as the "Guaranteed Obligations").

2.

Guarantor absolutely, irrevocably and unconditionally waives notice of acceptance of this Guaranty and notice of any payment, liability or obligation to which it may apply, and waives presentment, demand of payment, protest, notice of dishonor or nonpayment of such liabilities under this Guaranty or any of the Underlying Instruments creating the Guaranteed Obligations and any suit or taking other action by the Lender against, and any other notice to, any party liable thereon or any property which may be security therefor.

3.

The Lender may at any time and from time to time without the consent of, or notice to, Guarantor, without incurring any responsibility to Guarantor and without impairing or releasing any of the obligations of Guarantor hereunder, upon or without any terms or conditions and in whole or in part:

(a)

renew, alter or change the interest rate, manner, time, place or terms of payment or performance of any of the Guaranteed Obligations, or any liability incurred directly or indirectly in respect thereof, whereupon the guaranty herein made shall apply to the Guaranteed Obligations as so changed, extended, renewed or altered;

(b)

sell, exchange, release, surrender, and in any manner and in any order realize upon or otherwise deal with any property at any time directly and absolutely assigned or pledged or mortgaged to secure the Guaranteed Obligations or any liabilities (including any of those hereunder) incurred directly or indirectly in respect thereof;

(c)

exercise or refrain from exercising any rights against Borrower or any other person (including Guarantor) or otherwise act or refrain from acting with regard to the Underlying Instruments, Guaranteed Obligations or this Guaranty;

(d)

settle or compromise any of the Guaranteed Obligations, any security therefor or any liability (including any of those hereunder) incurred directly or indirectly in respect thereof or hereof, and/or subordinate the payment of all or any part thereof to the payment of any liability of Borrower (whether or not then due) to creditors of Borrower other than the Lender and Guarantor;

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(e)

apply any sums in whatever manner paid or realized to any liability or liabilities of Borrower to the Lender regardless of what liability or liabilities of Borrower remain unpaid;

(f)

consent to or waive any breach of or any act, omission or default under the Underlying Instruments or otherwise amend, modify or supplement any of such instruments or agreements; and/or

(g)

sell, convey or assign, whether into a securitized transaction or otherwise, all or any part of Lender's interest in this Guaranty and the Underlying Instruments.

4.

(a)

No invalidity, irregularity or unenforceability of all or any part of the Underlying Instruments, the Guaranteed Obligations or this Guaranty, or of any security therefor, shall affect, impair or constitute a defense to this Guaranty.  This Guaranty is a direct and primary obligation of Guarantor, and Guarantor's obligations hereunder are not as a surety.  This is a guaranty of payment and performance, and not merely a guaranty of collection.

(b)

Guarantor acknowledges and agrees that this Guaranty and Guarantor's obligations with respect to payments and performance under the Environmental Indemnity shall remain in full force and effect, notwithstanding the fact that the Note and payments due under the other Underlying Instruments have been paid in full.  The Guarantor’s obligations with respect to payments and performance under paragraph 9 of the Note shall remain in full force and effect until the liabilities and obligations of Borrower under paragraph 9 of the Note have been paid and performed in full.

5.

(a)

Notwithstanding any payment or payments made by Guarantor hereunder, Guarantor will not assert or exercise any right of the Lender or of such Guarantor against Borrower to recover the amount of any payment made by such Guarantor to the Lender by way of subrogation, reimbursement, contribution, indemnity or otherwise arising by contract or operation of law, and Guarantor shall not have any right of recourse to or any claim against assets or property of Borrower, whether or not the obligations of Borrower have been satisfied, all of such rights being herein expressly waived by Guarantor.  The provisions of this paragraph shall survive the termination of this Guaranty, and any satisfaction and discharge of Borrower by virtue of any payment, court order or any applicable law.

(b)

Notwithstanding the provisions of Section 5(a), Guarantor shall have and be entitled to all rights of subrogation otherwise provided by applicable law in respect of any payment Guarantor may make or be obligated to make under this Guaranty, and to assert and enforce the same, in each case on and after, but at no

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time prior to, the date (the "Subrogation Trigger Date") which is 91 days after the date on which all obligations under the Underlying Instruments shall have been paid or performed in full, if and only if the existence of Guarantor's rights under this Section 5(b) would not make Guarantor a creditor (as defined in the Bankruptcy Reform Act of 1978, an amended, 11 U.S.C. Sections 101 et seq., and the regulations adopted and promulgated pursuant thereto) of Borrower in any insolvency bankruptcy, reorganization or similar proceeding commenced on or prior to the Subrogation Trigger Date.

(c)

In the event that Guarantor shall advance or become obligated to pay any sums with respect to any obligation hereby guaranteed or in the event that for any reason whatsoever the Borrower or any subsequent owner of the collateral securing the Loan is now, or shall hereafter become, indebted to Guarantor, Guarantor agrees that the amount of such sums and of such Indebtedness together with all interest thereon, shall at all times be subordinate as to the lien, time of payment and in all other respects, to all sums, including principal, interest and other Indebtedness, at any time owing to the Lender under any of the Underlying Instruments.  Nothing herein contained is intended or shall be construed to give to Guarantor any right to participate in any way in the right, title or interest of the Lender in or to the collateral securing the Loan, notwithstanding any payments made by Guarantor under this Guaranty, all such rights of parti cipation being hereby expressly waived and released.

(d)

Guarantor waives all rights and defenses arising out of an election of remedies by the creditor, even though that election of remedies, such as a nonjudicial foreclosure with respect to security for a guaranteed obligation, has destroyed the guarantor's rights of subrogation and reimbursement against the principal by the operation of Section 580d of the Code of Civil Procedure or otherwise.

(e)

Guarantor waives any rights Guarantor might have pursuant to the terms of Sections of the California Civil Code or Code of Civil Procedure including without limitation the following: (i) Guarantor waives the benefit of any statute of limitations affecting Guarantor's liability hereunder or the enforcement thereof, including, without limitation all rights and benefits, if any, arising under Section 359.5 of the California Code of Civil Procedure; (ii) Guarantor hereby waives, to the fullest extent permitted by law, all rights and benefits under Section 2809 of the California Civil Code purporting to reduce a guarantor's obligations in proportion to the principal obligation, all rights and benefits under Section 580a of the California Code of Civil Procedure purporting to limit the amount of any deficiency judgment which might be recoverable following the occurrence of a trustee's sale under the Deed of Trust, all rights and benefits un der Section 580b of the California Code of Civil Procedure stating that no deficiency may be recovered on a real property purchase money obligation and all rights and benefits

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under Section 580d of the California Code of Civil Procedure stating that no deficiency may be recovered on a note secured by a deed of trust on real property in case such real property is sold under the power of sale contained in such deed of trust, to the extent any such sections have any application hereto or any application to Guarantor; (iii) Guarantor waives all rights and defenses that the Guarantor may have because the Borrower's debt is secured by real property.  This means, among other things:  (1) Lender may collect from the Guarantor without first foreclosing on any real or personal property collateral pledged by the Borrower, (2) if Lender forecloses on any real property collateral pledged by the Borrower:  (A) the amount of debt may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than th e sale price, (B) Lender may collect from the Guarantor even if Lender, by foreclosing on the real property collateral, has destroyed any right the Guarantor may have to collect from Borrower.  This is an unconditional and irrevocable waiver of any rights and defenses the Guarantor may have because Borrower's debt is secured by real property.  These rights and defenses include, but are not limited to, any rights or defenses based upon Section 580a, 580b, 580d, or 726 of the Code of Civil Procedure; (iv) without limiting the generality of the foregoing or any other provision hereof, the Guarantor waives all rights and benefits which might otherwise be available to the Guarantor under Division Third, Part 4, Title XII of the California Civil Code.

6.

Guarantor agrees that to the extent that Borrower makes a payment or payments to Lender, which payment or payments or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required, for any of the foregoing reasons or for any other reasons, to be repaid or paid over to a custodian, trustee, receiver or any other party under any bankruptcy act, state or federal law, common law or equitable cause, then to the extent of such payment or repayment, the obligation or part thereof intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made.

7.

Guarantor makes the following representations and warranties which shall survive the execution and delivery of this Guaranty:

(a)

Guarantor is and, until the Indebtedness is paid in full, will continue to (i) be a duly organized and validly existing entity in good standing under the laws of the state of its formation, (ii) be duly qualified as a foreign entity in each jurisdiction in which the nature of its business makes such qualification necessary or desirable, (iii) have the requisite power and authority to carry on its business as now being conducted, (iv) have the requisite power to execute, deliver and perform its obligations under this Guaranty, and (v) comply with the provisions of all of its organizational documents, and the Legal Requirements of the state of its formation.

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(b)

The execution, delivery and performance of this Guaranty (i) are within the applicable powers of Guarantor; (ii) have been authorized by all requisite action; (iii) have received all necessary approvals and consents, corporate, governmental or otherwise; (iv) does not and will not violate, conflict with, result in a breach of or constitute (with notice or lapse of time, or both) a default under any provision of law, any order or judgment of any court or governmental authority, the articles of incorporation, by-laws, partnership, operating or trust agreement, or other governing instrument of Guarantor, or any indenture, agreement or other instrument to which Guarantor is a party or by which Guarantor or any of Guarantor's assets is or may be bound or affected; (v) does not and will not result in the creation or imposition of any lien, charge or encumbrance whatsoever upon any of Guarantor's assets; and (vi) does not and will not requir e any authorization or license from, or any filing with, any governmental authority or other body.

(c)

This Guaranty constitutes the legal, valid and binding obligations of Guarantor, enforceable against Guarantor in accordance with its terms, except as may be limited by (i) bankruptcy, insolvency, reorganization or other similar laws affecting the rights of creditors generally, and (ii) general principles of equity (regardless of whether considered in a proceeding in equity or at law).

8.

Guarantor and Borrower are separate and distinct entities with no identity of interest with respect to any Indebtedness which may become owed or any payments which may be made hereunder.  Borrower is not contractually bound to Guarantor with respect to any payments hereafter made under this Guaranty in any manner which would have the effect of imputing the liability of Guarantor hereunder to Borrower.

9.

Guarantor is related and/or affiliated with Borrower, has personal knowledge of and is familiar with Borrower's business affairs, books and records and has the ability to influence Borrower's financial decisions.  Guarantor represents that Borrower is in sound financial condition as of the date of this Guaranty.

10.

Nothing herein contained shall in any manner affect the lien or priority of the Mortgage, and upon the occurrence of an Event of a Default, the Lender may invoke any remedies it may have under the Underlying Instruments, or this Guaranty, either concurrently or successively and the exercise of any one or more of such remedies shall not be deemed an exhaustion of such remedy or remedies or a waiver of any other remedy or remedies and shall not be deemed an election of remedies.  Guarantor hereby specifically waives any defense to its performance under this Guaranty based upon an election of remedies by Lender, including but not limited to an election to foreclose by nonjudicial sale under any deed of trust or security agreement and pursue any other remedy which destroys, lessens or otherwise affects Guarantor's subrogation rights and/or its rights to reimbursement from or to proceed against Borrower or any other person, when resul ting from the judicial

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or nonjudicial foreclosure (under any deed of trust or security agreement) or the selling or otherwise disposing of or collecting or applying any property, real or personal, securing the Note, or otherwise.  The exercise by the Lender of any such remedies shall not release or discharge Guarantor from its obligations hereunder unless and until the full amount of the Indebtedness evidenced by the Note and secured as aforesaid has been fully paid and satisfied, and any such release or discharge shall be subject to the provisions of paragraph 4(b) hereof.

11.

This Guaranty shall remain in full force and effect until all obligations of the Borrower under the Underlying Instruments have been satisfied in full and are no longer subject to disgorgement under any applicable state or federal creditor rights or bankruptcy laws.  No delay on the part of the Lender in exercising any options, powers or rights, or the partial or single exercise thereof, shall constitute a waiver thereof.  No waiver of any rights hereunder, and no modification or amendment of this Guaranty, shall be deemed to be made by either party unless the same shall be in writing, duly signed on behalf of such party, and each such waiver (if any) shall apply only with respect to the specific instance involved and shall in no way impair the rights of such party or the obligations of Guarantor to the Lender in any other respect at any other time.  This Guaranty and the rights and obligations of the Lender and of Guar antor hereunder shall be governed and construed in accordance with the laws of the state of California, without regard to its conflicts of law principles and this Guaranty is binding upon Guarantor, Guarantor's heirs, personal representatives and permitted successors or assigns, and shall inure to the benefit of the Lender and its successors or assigns.

12.

Guarantor acknowledges that copies of the Underlying Instruments have been made available to Guarantor and that Guarantor is familiar with their contents.  Guarantor affirmatively agrees that upon any Permitted Transfer effected in accordance with the provisions of the Underlying Instruments or any transfer by Lender of all or any portion of its interest in the Loan, it shall not be necessary for Guarantor to reaffirm its continuing obligations under this Guaranty, but Guarantor will do so upon request by Lender.

13.

GUARANTOR AND LENDER EACH KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE, TO THE EXTENT PERMITTED BY LAW, TRIAL BY JURY IN ANY ACTIONS BROUGHT BY GUARANTOR OR LENDER IN CONNECTION WITH THIS GUARANTY, ANY OF THE LOAN DOCUMENTS, THE INDEBTEDNESS SECURED HEREBY, OR ANY OTHER STATEMENTS OR ACTIONS OF LENDER.

14.

Each notice, consent, request or other communication under this Guaranty (each a "Notice") which any party hereto may desire or be required to give to the other shall be deemed to be adequate and sufficient notice if given in writing and service is made by either (i) registered or certified mail, postage prepaid, in which case such notice shall be deemed to have been received three (3) business days following deposit to U.S. mail; or

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(ii) nationally recognized overnight air courier, next day delivery, prepaid, in which case such notice shall be deemed to have been received one (1) business day following delivery to such nationally recognized overnight air courier.  All Notices shall be addressed to Guarantor at its address given on the first page hereof, or to Lender at c/o Principal Real Estate Investors, LLC, 801 Grand Avenue, Des Moines, Iowa 50392-1450, Attn: Commercial Real Estate Servicing, Loan No. 755503, or to such other place as any party may by notice in writing to the other parties designate as a place for service of notice.

15.

Each Guarantor (if more than one) whose signature appears below shall be deemed to be bound by the provisions of this Guaranty and the Guaranteed Obligations, whether each signature was affixed at the same or different times, and the term "Guarantor" as used herein shall be deemed to refer to each individually, as well as collectively, and each of the undersigned shall be jointly and severally liable for the Guaranteed Obligations hereunder, both personally and with recourse, irrespective of the recourse or non-recourse nature of the Underlying Instruments.  Guarantor agrees that if this Guaranty is placed in the hands of an attorney for enforcement, Guarantor will reimburse Lender all expenses incurred, including attorney's fees.

16.

This Guaranty may be executed in counterparts, each of which shall be deemed an original; and such counterparts when taken together shall constitute but one agreement.

17.

Capitalized terms used herein and not otherwise defined shall have the meanings given to them in the Underlying Instruments.

18.

Guarantor hereby irrevocably authorizes Lender to apply any and all amounts received by Lender in repayment of the Loan first to amounts which are not guaranteed pursuant to the terms of any guaranty and then to amounts which are guaranteed pursuant to the terms of any guaranty.  Guarantor hereby waives any and all rights it has or may have under Section 2822 of the California Civil Code which provides that if a guarantor is "liable upon only a portion of an obligation and the principal provides partial satisfaction of the obligation, the principal may designate the portion of the obligation that is to be satisfied."

19.

In the case of a power of sale foreclosure under the Mortgage, the fair market value of the real property collateral shall be conclusively deemed to be the amount of the successful bid at the foreclosure sale.  Guarantor waives any rights or benefits it may now or hereafter have to a fair value hearing under Section 580a of the California Code of Civil Procedure.  Lender shall have absolutely no obligation to make a bid at any foreclosure sale, but rather may make no bid or bid any amount which Lender, in its sole discretion, deems appropriate.

(Signatures on next page)

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IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be duly executed and delivered as of the date first set forth above.

GUARANTOR:

AIMCO PROPERTIES, L.P., a Delaware limited partnership

By:      AIMCO-GP, Inc., a Delaware   

            corporation, its general partner

            By: /s/Patti K. Fielding

       Name:  Patti K. Fielding

       Title:  Executive Vice President  

                              and Treasurer

EX-10

Exhibit 10.22

PROPERTY RESERVES AGREEMENT

755503

THIS PROPERTY RESERVES AGREEMENT (as the same may from time to time hereafter be modified, supplemented or amended, this "Agreement") is made as of January 19, 2007 by VMS NATIONAL PROPERTIES, an Illinois general partnership ("Borrower"), and PRINCIPAL LIFE INSURANCE COMPANY, an Iowa corporation ("Lender").

RECITALS

Lender has agreed to make a loan (the "Loan") in the original principal amount of Twenty-three Million Eight Hundred Thousand and 00/100 Dollars ($23,800,000.00) (the "Loan Amount") to Borrower as set forth in the Loan Documents, executed by and between Lender and Borrower; and

The Loan is evidenced by Borrower's Secured Promissory Note made payable and delivered to Lender (as may be modified, amended, supplemented, extended or consolidated in writing, and any note(s) issued in exchange therefor or in replacement thereof, the "Note") and further evidenced and secured by, among other things, a "Mortgage" (it being agreed that Mortgage as hereinafter used shall be construed to mean "mortgage" or "deed of trust" or "trust deed" or "deed to secure debt" as the context so requires) on certain real estate, together with all existing improvements constructed thereon, said Premises being more particularly described in said Mortgage.

NOW THEREFORE, in consideration of the making of the Loan, the mutual promises and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Lender and Borrower, intending to be legally bound, agree as follows:

1.

Property Reserves.

Borrower has agreed to deposit with Lender a letter of credit(s) (if more than one, collectively if the context so requires the "Letter of Credit") as detailed below to be held by Lender to reimburse Borrower for the costs of certain capital improvements to the Premises as described in Schedule 1 hereto and such other capital improvements to the Premises that Lender determines, in its sole discretion, provide a material benefit/improvement to the Premises upon completion thereof  (i.e. roof replacement/repair, new decks, rehabilitation of individual units) ("Capital Improvements").  The Letter of Credit and any renewal or replacement thereof and any proceeds therefrom shall be held by Lender as additional security for the Loan and are hereafter referred to as the "Property Reserves".  The term "Escrow Release" as used herein shall refer to a disb ursement of funds and/or a reduction of a Letter of Credit as applicable.

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a.

On the Closing Date, Borrower shall deliver an acceptable Letter of Credit in the amount of $1,358,953.00 to cover the cost of Capital Improvements.

2.

Borrower shall deliver to Lender not later than 30 days prior to the expiration date of any Letter of Credit and any renewal or replacement Letter of Credit, a renewal or replacement unconditional, irrevocable bank Letter of Credit identical in terms and amount and issued by a United States bank acceptable to Lender.  If Borrower shall fail to deliver any renewal or replacement Letter of Credit in accordance with the foregoing requirements, Lender may, in its discretion, draw upon any Letter of Credit then in its possession and hold such proceeds in accordance with the terms hereof.

Lender reserves the right to periodically review the financial condition of the issuing bank for any Letter of Credit and any renewal or replacement Letter of Credit and if Lender determines that the issuing bank no longer satisfies the criteria set forth above, Lender may require a replacement Letter of Credit in form and substance and from a United States bank acceptable to Lender.

3.

Standard Disbursement Requirements.  The following shall be defined as "Standard Disbursement Requirements":

(i)

copies of unconditional lien waivers for work completed which is the subject of the Escrow Release request;

(ii)

a title search in form and substance reasonably acceptable to Lender and if such search discloses conditions unacceptable to Lender or Lender deems it reasonably necessary, then such endorsements or other assurances reasonably satisfactory to Lender from the title insurance company insuring the continued first lien priority of the Mortgage;

(iii)

to the extent Lender deems reasonably necessary and to the extent that same are available and appropriate for the work which is the subject of the Escrow Release request, any or all of the following at Lender's discretion:  (A) all permits, bonds, licenses and approvals, whether necessary for commencement, performance, completion, occupancy, use or otherwise required by any applicable laws for the stage of work so completed; (B) a copy of the construction contract and any change orders and addenda thereto; (C) a statement from an architect, contractor or engineering consultant, in Lender's reasonable discretion, as to the extent and cost of the work so completed; and/or (D) other evidence as reasonably determined by Lender showing that Borrower has completed and performed the portion of the work which is the subject of the Escrow Release request; and

(iv)

Lender having inspected, or having expressly waived in writing such inspection, and approved the completed portion of the work which is the subject of the

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Escrow Release request.  Lender shall not require said inspection more than once per calendar year.

4.

Capital Improvements.

a.

Except as hereinafter provided and so long as no Event of Default has occurred and is continuing under the Loan Documents, Lender shall allow Escrow Release(s) in the amounts hereinafter specified in accordance with the following terms and conditions:

(i)

Escrow Release(s) shall be for an amount equal to the actual costs and expenses incurred by Borrower in completing any Capital Improvements;

(ii)

Borrower shall submit written Escrow Release requests to Lender for Capital Improvements no more than once per calendar month and each such request shall be for an aggregate amount of not less than $25,000 (excluding the final disbursement); and

(iii)

Escrow Release(s) shall be conditioned upon Borrower furnishing to Lender with its written request, at Lender's discretion, the Standard Disbursement Requirements.

5.

Interest on Property Reserves.  Provided no Event of Default has occurred under any of the Loan Documents, Lender agrees to credit Borrower with interest earnings on the cash portion of the Property Reserves, (excluding however any cash proceeds resulting from Lender having drawn on any Letter of Credit or any renewal or replacement thereof); provided, however, that interest shall cease to be credited on any portion of the Property Reserves at such time as they have been disbursed to Borrower or otherwise applied in any manner provided in this Agreement or in the other Loan Documents.  Interest shall be credited on the average balance of the cash portion of the Property Reserves for the preceding calendar month or any portion of such preceding calendar month on or before the tenth (10^th) day of each calendar month at a rate equal to the thirty-day average of the daily 30-day Dealer Commercial Paper Rate as p ublished in the Wall Street Journal or similar financial publication, less 200 basis points.  Interest shall be disbursed to Borrower at such time and in the same manner as provided for disbursement of Property Reserves.

6.

Administration/Inspection Fee.  Lender shall be entitled to charge Borrower a reasonable processing fee for administering and reviewing an Escrow Release, not to exceed $500.00.  Lender shall also be entitled to charge Borrower reasonable processing fees both for reviewing any renewal or replacement Letter of Credit which Borrower is required to provide as well as for drawing upon any Letter of Credit held pursuant to the terms hereof (the processing fee for reviewing any renewal or replacement Letter of Credit shall not exceed $250.00).  Borrower shall be responsible for payment of all costs, fees and charges in connection with any

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reduction, renewal or replacement of the Letter of Credit which are assessed by the issuing bank.  Additionally, Lender shall be entitled to charge Borrower for any reasonable costs incurred by Lender in inspecting the Premises, not to exceed $750.00.

7.

Security Agreement.  This Agreement and the escrow of the Property Reserves under the terms hereof are intended to create a prior perfected security interest in the Property Reserves.  As more fully described in the Loan Documents, Borrower has assigned, conveyed, pledged and transferred to Lender and granted to Lender a first and continuing lien on and security interest in and to, among other things, all of Borrower's right, title and interest in and to the Property Reserves, which secure the full and punctual payment and performance of all of the Indebtedness.  Nothing contained herein shall cause Lender to be deemed a trustee of any Letter of Credit, any renewal thereof or any proceeds therefrom.  The Property Reserves shall not constitute any deposit or account of the Borrower or monies to which the Borrower is entitled upon demand, or upon the mere passage of time.  Lender shall not be required to s egregate the Property Reserves or hold them in any separate account for the benefit of the Borrower.  Upon the payment in full of all sums due to Lender under the Loan Documents, Lender shall promptly deliver the then existing Property Reserves to Borrower.

8.

Event of Default.  Upon the occurrence of an Event of Default under any of the Loan Documents, Lender may, with respect to the Property Reserves, or any portion thereof, exercise all enforcement rights and remedies granted to Lender under the Loan Documents and in addition to all other rights and remedies granted to Lender under the Loan Documents, Lender may, at its option, use such funds partially or in full (including any portion or all of the proceeds resulting from drawing on any Letter of Credit), in such order and preference as Lender may determine, to (1) cure or partially cure any Event of Default; (2) complete the work which is the subject of this Agreement; (3) pay any interest accrued under the terms of the Note; (4) pay any other Indebtedness; (5) pay the Make Whole Premium, if any, due and payable; (6) prepay the principal amount of the Loan or any part thereof; or (7) hold such funds in a non-interest bearing account as additional security for the Loan.  In the event the Property Reserves or any portion thereof are applied to prepay the principal amount of the Loan or any part thereof, Borrower waives any right to prepay the principal amount in whole or in part without premium, and agrees to pay, as liquidated damages and not as a penalty, a Make Whole Premium on any principal amount prepaid.  Notwithstanding anything contained herein to the contrary, nothing shall be construed to (a) make Lender responsible for performing or completing the work which is the subject of this Agreement, (b) require Lender to expend sums to complete the work which is the subject of this Agreement which are in excess of such amounts then allocated by Lender for such items, or (c) obligate Lender to demand from Borrower additional sums to complete the work which is the subject of this Agreement.

9.

Cost Overruns.  In the event that the costs and expenses incurred by Borrower in completing any work which is the subject of this Agreement exceed the respective amounts allocated by Lender for such items of expense, Borrower shall be responsible for the payment (from sources other than the Property Reserves) of such excess costs and expenses.

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10.

Notices.  All notices required to be sent hereunder shall be deemed to be an adequate and sufficient notice if given in accordance with the notice provisions of the Mortgage.

11.

Governing Law.  This Agreement shall be governed, construed, and enforced in accordance with the laws of the state in which the Premises is located, without regard to its conflicts of law principles.

12.

Headings.  The headings used herein are for convenience only and are not to be used in interpreting this Agreement.  Capitalized terms used herein and not otherwise defined shall have those meanings given to them in the Loan Documents.  Notwithstanding anything herein to the contrary, the terms and provisions of this Agreement as to Escrow Release(s) shall control over any provisions in the other Loan Documents to the contrary.

13.

Amendments.  This Agreement, and any provisions hereof, may not be modified, amended, waived, extended, changed, discharged or terminated orally or by any act or failure to act on the part of Borrower or Lender, but only by an agreement in writing signed by the parties hereto.

14.

Counterparts.  This Agreement may be executed in counterparts, each of which shall be deemed an original; and such counterparts when taken together shall constitute but one agreement.

15.

Inapplicable Provisions.  If any term, covenant or condition of this Agreement is held to be invalid, illegal or unenforceable in any respect, this Agreement shall be construed without such provision.

16.

Successors and Assigns.  This Agreement and all the provisions hereof shall inure to the benefit of the heirs, successors and assigns of Lender and shall bind the heirs, representatives, and permitted successors and assigns of Borrower.

(Signatures on next page)

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IN WITNESS WHEREOF, Borrower and Lender have hereunto caused this Agreement to be executed the date first above written.

LENDER:

PRINCIPAL LIFE INSURANCE COMPANY, an Iowa corporation

By:

PRINCIPAL REAL ESTATE INVESTORS, LLC, a Delaware limited liability company, its authorized signatory

By

__________________________

Name:

Title:

By

__________________________

Name:

Title:

(Signatures continued on following page)

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BORROWER:

VMS NATIONAL PROPERTIES, an Illinois general partnership

By:

VMS NATIONAL RESIDENTIAL PORTFOLIO I, an Illinois limited partnership

By:

MAERIL, INC., a Delaware  

                        corporation, its general partner

       By: /s/Patti K. Fielding

       Name:  Patti K. Fielding

                Title:  Executive Vice President  

                           and Treasurer

By:

VMS NATIONAL RESIDENTIAL PORTFOLIO II, an Illinois limited partnership

By:

MAERIL, INC., a Delaware  

                        corporation, its general partner

       By: /s/Patti K. Fielding

       Name:  Patti K. Fielding

                Title:  Executive Vice President  

                           and Treasurer

EX-10

EXHIBIT 10.23

SECURED PROMISSORY NOTE

755502

$13,000,000.00

January 19, 2007

1.

FOR VALUE RECEIVED, VMS NATIONAL PROPERTIES, an Illinois general partnership, as "Borrower" ("Borrower"), hereby promises to pay to the order of PRINCIPAL LIFE INSURANCE COMPANY, an Iowa corporation (as "Lender"), the principal sum of Thirteen Million and 00/100 Dollars ($13,000,000.00) or so much thereof as shall from time to time have been advanced, together with interest on the unpaid balance of said sum from January 19, 2007 (the "Closing Date"), at the rate of six and sixteen one-hundredths percent (6.16%) per annum.  

A payment of interest from the Closing Date to and including January 31, 2007 shall be paid on the Closing Date calculated by multiplying the actual number of days elapsed in the period for which interest is being calculated by a daily rate based on the foregoing annual interest rate and a 360-day year.  Thereafter, interest shall be computed on the unpaid balance on the basis of a 360-day year composed of twelve 30-day months.  Beginning on March 1, 2007, interest shall be due and payable in installments of Sixty-six Thousand Seven Hundred Thirty-three and 33/100 Dollars ($66,733.33), with an installment in a like amount due and payable on the same day of each month thereafter, and except as otherwise provided in this Note, all remaining principal and interest to the date of payment and other indebtedness shall be due and payable on February 1, 2010 ("Call Date").  Lender shall have the r ight to declare this Note to be due and payable in full on the Call Date or to adjust the per annum interest rate on the Rate Adjustment Date to an interest rate established by Lender ("Adjusted Interest Rate") as herein provided (and apply an amortization schedule, if any, as herein provided).  In the event Lender elects to declare this Note to be due and payable, this Note shall become due and payable, in full, without a Make Whole Premium on the Call Date.  In the event Lender elects to adjust the interest rate, then on February 1, 2010 ("Rate Adjustment Date") the per annum interest rate shall be adjusted to the Adjusted Interest Rate and commencing on March 1, 2010, monthly installments of principal (if applicable) and interest shall be due and payable on the same day of each month thereafter, except that all remaining principal and interest to the date of payment shall be due and payable on February 1, 2012 or such earlier date resulting from a cceleration of the Indebtedness by Lender ("Maturity Date").  Each installment shall be credited first upon interest then accrued and the remainder upon principal.  All principal and interest shall be paid in lawful money of the United States of America, by wire transfer of immediately available funds to Lender.  Any other monthly deposits or payments Borrower is required to make to Lender under the terms of the Loan Documents shall be made by the same payment method and on the same date as the installments of principal and interest due under this Note.

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Lender shall notify Borrower in writing ("Lender's Election Notice") on or before November 1, 2009 of Lender's election to adjust the interest rate or of Lender's intention to declare this Note to be due and payable in full.  In the event Lender elects to adjust the interest rate, Lender's Election Notice will contain (i) the number of basis points ("Spread") and the United States Treasury Issue (which shall be the two (2) year United States Treasury Issue) that Lender anticipates it will use to establish the Adjusted Interest Rate and (ii) the amortization schedule Lender has elected to apply, if any.  The Spread shall be determined by Lender in its sole discretion based on Lender's evaluation of:  (i) the then current financial performance and projected risk of the Premises, which shall encompass various factors, including but not limited to contract debt service coverage, loan-to - -value ratio, economic debt service coverage, occupancy, frequency of tenant rollover, financial strength and stability of tenants; (ii) the then current financial status of Borrower, which shall include but not be limited to creditworthiness, financial strength, percentage of liabilities to liquid assets, and annual net income; and (iii) the remaining term and current outstanding balance of the Note.  

At any time and from time to time before the Adjusted Interest Rate is established, provided at least seven (7) days have elapsed since the previous Lender's Election Notice, Lender may establish a new Spread which Lender anticipates it will use to establish the Adjusted Interest Rate and notify Borrower of the same.  The Adjusted Interest Rate and amortization schedule, if any, must be established by mutual written agreement of Lender and Borrower by December 1, 2009 (the "Rate Set Deadline").  The Adjusted Interest Rate may only be established by mutual written agreement of Lender and Borrower and simultaneous payment by Borrower of Twelve Thousand Three Hundred and 00/100 Dollars ($12,300.00) ("Rate Adjustment Fee"). Notwithstanding anything contained herein to the contrary in the event:  (i) Lender notifies Borrower of its intention to declare this Note to be due and payable in full, (ii) Lender and Borrower are unable for any reason to mutually agree in writing on the Adjusted Interest Rate by the Rate Set Deadline; or (iii) Borrower fails to pay the Rate Adjustment Fee to Lender when due, this Note shall become due and payable in full, on the Call Date, without a Make Whole Premium, and all principal, interest accrued or to accrue to the date of prepayment at the rate in effect at the time of the initial Lender's Election Notice, and all other Indebtedness shall become immediately due and payable in full.  Notwithstanding any other provision herein, Lender shall not be obligated to adjust the interest rate if any default exists under this Note or the Loan Documents.

In the event Borrower accepts the Adjusted Interest Rate, then notwithstanding anything herein or in any of the Loan Documents to the contrary, Borrower shall have no right to prepay the Loan at par during the Open Period and any prepayment will be subject to a Make Whole Premium for the period ending on the Maturity Date calculated at the Adjusted Interest Rate.

In the event Borrower accepts the Adjusted Interest Rate, Borrower is required to provide Lender the following:

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(i)

a new ALTA standard loan title policy for the Loan or an endorsement updating said title policy in the full amount of the in form and by an issuer satisfactory to Lender at the time of the rate adjustment unless (x) the outstanding balance of the Loan at the time of the Call Date is equal to or less than $20,000,000.00, (y) no liens or encumbrances exist against the Premises except as previously approved by Lender in the Deed of Trust, and (z) no mortgages or deeds of trust exist against the Premises except for the Mortgage.  Borrower further agrees that the policy shall insure Lender's Deed of Trust, at the Adjusted Interest Rate to be a first and prior lien subject only to those exceptions which were previously approved by Lender and provide coverage against mechanic's liens;

(ii)

an amendment to the Note in form and substance satisfactory to Lender executed by Borrower evidencing the Adjusted Interest Rate and a representation that the Premises is free and clear of any liens, privileges, mortgages or encumbrances except as expressly permitted in the Deed of Trust;

(iii)

a usury opinion or endorsement to the title policy acceptable to Lender if Lender reasonably believes that the Adjusted Interest Rate is or may be usurious; and

(iv)

a title search acceptable to Lender and reimbursement for Lender's costs incurred in obtaining the same.

2.

No privilege is reserved by Borrower to prepay any principal of this Note prior to the Maturity Date, except on or after the date hereof, privilege is reserved, after giving thirty (30) days' prior written notice to Lender, to prepay in full, but not in part, all principal and interest to the date on which payment is made, along with all sums, amounts, advances, or charges due under any instrument or agreement by which this Note is secured, upon the payment of a "Make Whole Premium" if required by the schedule below, provided that Borrower simultaneously exercises its right to prepay the Other Note as provided for therein.  The Make Whole Premium shall be based on the following schedule:

(i)

if prepayment occurs prior to March 1, 2008 or after February 1, 2010 and prior to March 1, 2011, the Make Whole Premium shall be one-half percent (.50%) of the principal amount to be prepaid;

(ii)

provided no Event of Default exists, during the period beginning on or after March 1, 2008 to and including February 1, 2010 or on or after March 1, 2011 to and including February 1, 2012 (each collectively the "Open Period") no Make Whole Premium shall be payable.

3.

Borrower agrees that if Lender accelerates the whole or any part of the principal sum evidenced hereby after the occurrence of an Event of Default but prior to the Open Period,

-4-

Borrower waives any right to prepay said principal sum in whole or in part without premium and agrees to pay, as yield maintenance protection and not as a penalty, the Make Whole Premium.  

In the event any proceeds from a casualty or Taking of the Premises are applied to reduce the principal balance hereof, such reduction shall be made without a Make Whole Premium, provided no Event of Default then exists under the Loan Documents.

Borrower by adding its initials to the end of this paragraph, (A) expressly waives any rights it may have under California Civil Code Section 2954.10 to prepay this Note, in whole or in part, without penalty, upon acceleration of the Indebtedness and (B) acknowledges and agrees that Borrower has no right of prepayment of this Note, except as provided above; and that, if the maturity of this Note is accelerated by Lender, Borrower specifically agrees to pay as a prepayment premium, the applicable sum specified herein as the Make Whole Premium, specifically including but not limited to the case where the holder of this Note has accelerated the maturity of this note due to Borrower's default of any provision contained in 2(f) of the Deed of Trust.  By initialing this provision, Borrower hereby declares that Lender's agreement to make the Loan evidenced by this Note for the interest rate and for the term set forth in this Note con stitutes adequate consideration, given individual weight by Borrower, for this waiver and agreement.

Initials: ________________    ________________

4.

If any payment of principal, interest, or other Indebtedness is not made when due, damages will be incurred by Lender, including additional expense in handling overdue payments, the amount of which is difficult and impractical to ascertain.  Borrower therefor agrees to pay, upon demand, the sum of four cents ($.04) for each one dollar ($1.00) of each said payment which becomes overdue ("Late Charge") as a reasonable estimate of the amount of said damages, subject, however, to the limitations contained in paragraph 6 hereof.

Notwithstanding anything hereinabove to the contrary, the Late Charge assessed on any amount due on the Maturity Date or the Call Date (if Lender declares this Note due and payable as described hereinabove) but not then paid, whether or not by acceleration, shall not be four cents for each one dollar as described above, but shall instead be a sum equal to the interest which would have accrued on the principal balance then outstanding from the date the payment was due to the end of the month in which the Maturity Date or Call Date (if applicable) occurs.  Such Late Charge shall be in addition to interest otherwise accruing under this Note.

5.

If any Event of Default has occurred and is continuing under the Loan Documents, the entire principal balance of the Loan, interest then accrued, and Make Whole Premium, and all other Indebtedness whether or not otherwise then due, shall at the option of Lender, become immediately due and payable without demand or notice, and whether or not Lender has exercised said option, interest shall accrue on the entire principal balance, interest then accrued, Make Whole Premium and any other Indebtedness then due, at a rate equal to the Default Rate until fully paid.

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6.

Notwithstanding anything herein or in any of the other Loan Documents to the contrary, no provision contained herein or therein which purports to obligate Borrower to pay any amount of interest or any fees, costs or expenses which are in excess of the maximum permitted by applicable law, shall be effective to the extent it calls for the payment of any interest or other amount in excess of such maximum.  All agreements between Borrower and Lender, whether now existing or hereafter arising and whether written or oral, are hereby limited so that in no contingency, whether by reason of demand for payment or acceleration of the maturity hereof or otherwise, shall the interest contracted for, charged or received by Lender exceed the maximum amount permissible under applicable law.  If, from any circumstance whatsoever, interest would otherwise be payable to Lender in excess of the maximum lawful amount, the interest payable to Lend er shall be reduced to the maximum amount permitted under applicable law; and if from any circumstance Lender shall ever receive anything of value deemed interest by applicable law in excess of the maximum lawful amount, an amount equal to any excessive interest shall, at the option of Lender, be refunded to Borrower or be applied to the reduction of the principal hereof, without a Make Whole Premium and not to the payment of interest or, if such excessive interest exceeds the unpaid balance of principal hereof such excess shall be refunded to Borrower.  This paragraph shall control all agreements between Borrower and Lender.

7.

Borrower and any endorsers or guarantors waive presentment, protest and demand, notice of protest, demand and dishonor and nonpayment, and agree the Maturity Date of this Note or any installment may be extended without affecting any liability hereunder, and further promise to pay all reasonable costs and expenses, including but not limited to, reasonable attorney's fees incurred by Lender in connection with any default or in any proceeding to interpret and/or enforce any provision of the Loan Documents.  No release of Borrower from liability hereunder shall release any other maker, endorser or guarantor hereof.

8.

This Note is secured by the Loan Documents creating among other things legal and valid encumbrances on and an assignment of all of Borrower's interest in any Leases of the Premises located in the county of Sacramento, State of California.  Capitalized terms used herein and not otherwise defined shall have those meanings given to them in the Loan Documents.  In no event shall such documents be construed inconsistently with the terms of this Note, and in the event of any discrepancy between any such documents and this Note, the terms hereof shall govern.  The proceeds of this Note are to be used for business, commercial, investment or other similar purposes, and no portion thereof will be used for any personal, family or household use.  This Note shall be governed by and construed in accordance with the laws of the State where the Premises is located, without regard to its conflict of law principles.

9.

Notwithstanding any provision to the contrary in this Note or the Loan Documents and except as otherwise provided for below, the liability of Borrower under the Loan Documents shall be limited to the interest of Borrower in the Premises and the Rents.  In the event of foreclosure of the liens evidenced by the Loan Documents, no judgment for any deficiency upon the Indebtedness evidenced by the Loan Documents shall be sought or obtained by Lender

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against Borrower.  Nothing herein shall in any manner limit or impair (i) the lien or enforcement of the Loan Documents pursuant to the terms thereof or (ii) the obligations of any indemnitor or guarantor, if any.

Notwithstanding any provision hereinabove to the contrary, Borrower shall be personally liable to Lender for:

(a)

any loss or damage to Lender arising from (i) the sale or forfeiture of the Premises resulting from Borrower's failure to pay any of the taxes, assessments or charges specified in the Loan Documents or (ii) Borrower's failure to insure the Premises in compliance with the provisions of the Loan Documents;

(b)

any event or circumstance for which Borrower indemnifies Lender under the Environmental Indemnity;

(c)

nonpayment of taxes, assessments, insurance premiums and utilities for the Premises and any penalty or late charge associated with nonpayment thereof prior to the Sale (as defined below) of the Premises;

(d)

any loss or damage to the Premises as a result of waste, gross negligence or willful misconduct by Borrower;  

(e)

intentionally deleted;

Borrower's personal liability for items specified in (c) and (d) above shall be limited to the amount of rents, issues, proceeds and profits from the Premises ("Rents and Profits") received by Borrower for the twenty-four (24) months preceding an Event of Default and thereafter; but less any such Rents and Profits applied to (A) payment of principal, interest and other charges when due under the Loan Documents, or (B) payment of expenses for the operation, maintenance, taxes, assessments, utility charges and insurance of the Premises including sufficient reserves for the same or replacements or renewals thereof ("Operation Expense(s)") provided that (x) Borrower has furnished Lender with evidence reasonably satisfactory to Lender of the Operation Expenses and payment thereof, and (y) any payments to parties related to Borrower shall be considered an Operation Expense only to the extent that the amount expended for the Operation Expense does not exceed the then current market rate for such Operation Expense.

(f)

misapplication or misappropriation of rents in violation of the Loan Documents;  

(g)

any security deposits of tenants not otherwise applied in accordance with the terms of the Lease(s), together with any interest on such security deposits required by law or the leases, not turned over to Lender upon conveyance of the Premises

-7-

to Lender pursuant to foreclosure or power of sale or by a deed acceptable to Lender in form and content;

(h)

any loss or damage to Lender arising from the misapplication or misappropriation of tax reserve accounts, tenant improvement reserve accounts, security deposits, prepaid rents or other similar sums paid to or held by Borrower or any other entity or person in connection with Borrower’s operation of the Premises;

(i)

any insurance or condemnation proceeds or other similar funds or payments applied by Borrower in a manner other than as expressly provided in the Loan Documents;

(j)

any loss or damage to Lender arising from any fraud or willful misrepresentation by or on behalf of Borrower, Interest Owner or any guarantor regarding the Premises, the making or delivery of any of the Loan Documents or in any materials or information provided by or on behalf of Borrower, Interest Owner or guarantor, if any, in connection with the Loan; and

(k)

any loss or damage to Lender arising from the loss of Lender’s perfection or priority of its security interest in personal property or fixtures covered under any UCC financing statement due to borrower’s failure to notify Lender as provided for in paragraph 1(h) of the Mortgage.

Notwithstanding anything contained in paragraphs 9(a)(i) and 9(c) hereinabove as it relates solely to taxes, assessments and insurance premiums, to the extent Lender is impounding for taxes, assessments and insurance premiums in accordance with the Loan Documents and Borrower has fully complied with all terms and conditions of the Loan Documents relating to impounding for the same, then Borrower shall not be personally liable for Lender's failure to apply any of said impound amounts held by Lender in accordance with the Loan Documents.

Notwithstanding anything to the contrary in the Loan Documents, the limitation on liability contained in the first paragraph of this paragraph 9 SHALL BECOME NULL AND VOID and shall be of no further force and effect in the event:

(y)

of any breach or violation of paragraph 2(f) (due on sale or encumbrance) of the Mortgage, other than (i) the filing of a nonmaterial mechanic's lien affecting the Premises or a mechanic's lien affecting the Premises for which Borrower has complied with the provisions of paragraph 1(e) of the Mortgage, or (ii) the granting of any utility or other nonmaterial easement or servitude burdening the Premises, or (iii) any transfer or encumbrance of a nonmaterial economic interest in the Premises not otherwise set forth in (i) or (ii), or (iv) an immaterial breach or violation of the Property Transfer Requirements, Ownership Transfer

-8-

Requirements, Specific Transfer Requirements I-V or the Mezzanine Financing Requirements; or

(z)

of any filing by Borrower of a petition in bankruptcy or insolvency or a petition or answer seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under the Bankruptcy laws of the United States or under any other applicable federal, state or other statute or law.

10.

If more than one, all obligations and agreements of Borrower are joint and several.

11.

This Note may not be changed or terminated orally, but only by an agreement in writing and signed by the party against whom enforcement of any waiver, change, modification or discharge is sought.  All of the rights, privileges and obligations hereunder shall inure to the benefit of the heirs, successors and assigns of Lender and shall bind the heirs and permitted successors and assigns of Borrower.  

12.

If any provision of this Note shall, for any reason, be held to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision hereof, but this Note shall be construed as if such invalid or unenforceable provision had never been contained herein.

13.

This Note may be executed in counterparts, each of which shall be deemed an original; and such counterparts when taken together shall constitute but one agreement.

14.

This provision does not represent a commitment by Lender to lend additional dollars (the "Additional Advance") to Borrower, as Lender is under no obligation to make an Additional Advance. Borrower may request Lender to fund to Borrower an additional advance of principal ("Request for Advance"), provided the requested Additional Advance, in combination with the original Loan, meet certain "Minimum Economic Criteria" (set forth below).    

If Lender does choose to make an Additional Advance, the following conditions precedent must be satisfied:

The "Minimum Economic Criteria" are:

(a)

The combined outstanding Indebtedness on the original Loan and the Additional Advance does not exceed seventy-seven percent (77%) of the appraised value of the Premises as established by an appraisal of the Premises prepared by an MAI appraiser approved by Lender and in form and substance acceptable to Lender, said appraisal at Borrower's cost;

(b)

Debt service of coverage of 1.20 times the annual debt service on the combined outstanding Indebtedness on the original Loan and the Additional Advance, as determined by Lender.  The debt service coverage shall be the annual net operating income divided by the total annual installment payments due under the combined outstanding

-9-

Indebtedness on the original Loan and the Additional Advance, including accrued or capitalized interest.  Only net operating income from approved executed Leases in effect on the Premises with no uncured defaults shall be used in Lender's determination of the foregoing.  Borrower shall provide a certified rent roll with its Request for Advance; and

(c)

At the time of the Request for Advance, at least twelve (12) months must remain in the Loan term.

Provided no Event of Default exists under the Loan Documents, if Lender determines that the Minimum Economic Criteria are satisfied, Lender may notify Borrower in writing ("Lender's Notice") of the number of basis points ("Spread") and the United States Treasury Issue ("Treasury Issue") that Lender will use to establish the interest rate applicable to the Additional Advance ("AA Interest Rate").  The Spread shall be determined by the Lender, in its sole discretion.

At any time and from time to time before the date that the AA Interest Rate is agreed to, provided at least seven (7) days have elapsed since the previous Lender's Notice, Lender may establish a new Spread which Lender anticipates it will use to establish the AA Interest Rate and notify Borrower of the same.  The AA Interest Rate must be established by the date which is 30 days following the date of the initial Lender's Notice (the "AA Rate Set Deadline").  The AA Interest Rate may only be established on a date mutually agreed to by Lender and Borrower. If Borrower fails to respond to the most current Lender's Notice in writing by the AA Rate Set Deadline, all of the Lender's Notices shall be deemed rejected.  If Borrower rejects the terms set forth in the Lender's Notice, Borrower shall then have the right to obtain Mezzanine Financing on the terms set forth in the Mortgage.  If Borrower accepts the terms set forth in Lender's Notice, Lender shall agree to fund the Additional Advance, provided the following closing conditions ("Closing Conditions") are met:

(a)

Borrower's execution, delivery, acknowledgement and recordation, as applicable, of acceptable documentation evidencing and securing the Additional Advance including, but not limited to, additional note(s), revised and/or replacement loan modification agreements, indemnification agreements, escrow security or property reserve agreements, security instruments, financing statements, UCCs, new or revised letters of credit and/or guarantees in form and substance satisfactory to Lender;

(b)

Receipt of either (at Lender's discretion) a new ALTA standard loan policy or an endorsement updating the Lender's existing loan policy in the full amount of the Loan (as increased by the Additional Advance), in form and by an issuer satisfactory to Lender, and which insures the Mortgage to be a first and prior lien subject only to those exceptions which were previously approved by Lender and provides coverage against usury and mechanic's liens (an acceptable usury opinion can be substituted for the usury coverage);

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(c)

Compliance with Lender's then current underwriting and closing due diligence requirements.

(d)

Receipt of acceptable third party reports addressing property physical and environmental condition, upon request of Lender, prepared by consultants acceptable to Lender;

(e)

Payment by Borrower of all third party expenses incurred, including but not limited to outside counsel fees and costs;

(f)

Payment of Borrower of an "Additional Advance Fee" equal to .5% of the amount of the Additional Advance.  The Additional Advance Fee is non-refundable and is due upon Borrower's acceptance of the terms set forth in the Lender's Notice.

In the event (i) Lender does not choose to make the Additional Advance; (ii) Borrower rejects the terms set forth in the Lender's Notice, or (iii) Borrower is unable to satisfy the Closing Conditions, Borrower shall have the ability to obtain Mezzanine Financing as more particularly described in paragraph 2(f) of the Mortgage.

(Signatures on next page)

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IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed and delivered as of the date first set forth above.

VMS NATIONAL PROPERTIES, an Illinois general partnership

By:

VMS NATIONAL RESIDENTIAL PORTFOLIO I, an Illinois limited partnership

By:

MAERIL, INC., a Delaware  

                        corporation, its general partner

       By: /s/Patti K. Fielding

       Name:  Patti K. Fielding

                Title:  Executive Vice President  

                           and Treasurer

By:

VMS NATIONAL RESIDENTIAL PORTFOLIO II, an Illinois limited partnership

By:

MAERIL, INC., a Delaware  

                        corporation, its general partner

       By: /s/Patti K. Fielding

       Name:  Patti K. Fielding

                Title:  Executive Vice President  

                           and Treasurer

EX-10

EXHIBIT 10.24

Record and return to:

Principal Life Insurance Company

c/o Principal Real Estate Investors, LLC

801 Grand Avenue

Des Moines, IA  50392-1360

ATTN:  Erin Coghlan

DEED OF TRUST, SECURITY AGREEMENT

ASSIGNMENT OF RENTS AND FIXTURE FILING

THE NOTE SECURED BY THIS DEED OF TRUST CONTAINS AN

ADJUSTABLE INTEREST RATE

755502

A.

THIS DEED OF TRUST, SECURITY AGREEMENT AND ASSIGNMENT OF RENTS AND FIXTURE FILING (as the same may from time to time hereafter be modified, supplemented or amended, this "Deed of Trust") is made as of January 19, 2007, by and between VMS NATIONAL PROPERTIES, an Illinois general partnership, having its principal place of business and post office address at 4582 South Ulster Street Parkway, Suite 1100, Denver, Colorado 80237, as "Borrower" ("Borrower" to be construed as "Borrowers" if the context so requires), Brenda S. Tyler, of 801 Grand Avenue, Des Moines, Iowa, as "Trustee", and PRINCIPAL LIFE INSURANCE COMPANY, an Iowa corporation, as "Lender".

WITNESSETH:

B.

Borrower is justly indebted to Lender for money borrowed (the "Loan") in the original principal sum of Thirteen Million and 00/100 Dollars ($13,000,000.00) (the "Loan Amount") evidenced by Borrower's secured promissory note of even date herewith, made payable and delivered to Lender (as may be modified, amended, supplemented, extended or consolidated in writing and any note(s) issued in exchange therefor or replacement thereof) (the "Note"), in which Note Borrower promises to pay to Lender the Loan Amount, together with all accrued and unpaid interest thereon, interest accrued at the Default Rate (if any), Late Charges (if any), the Make Whole Premium (if any), and all other obligations and liabilities due or to become due to Lender pursuant to the Loan Documents and all other amounts, sums and expenses paid by or payable to Lender pursuant to the Loan Documents and the Environmental Indemnity (collectively the "Indebtedness") until the Indebtedness has been paid, but in any event, the unpaid balance (if any)

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remaining due on the Note shall be due and payable on February 1, 2012 (the "Maturity Date") or such earlier date resulting from the acceleration of the Indebtedness by Lender.  Capitalized terms used herein and not otherwise defined shall have those meanings given to them in the other Loan Documents.

C.

NOW, THEREFORE, to secure the payment of the Indebtedness in accordance with the terms and conditions of the Loan Documents, and all extensions, modifications, and renewals thereof and the performance of the covenants and agreements contained therein, and also to secure the payment of any and all other Indebtedness, direct or contingent, that may now or hereafter become owing from Borrower to Lender in connection with the Loan Documents, and in consideration of the Loan Amount in hand paid, receipt of which is hereby acknowledged, Borrower does by these presents irrevocably grant, transfer and assign in trust with power of sale and right of entry and possession unto Trustee, its successors and assigns forever, that certain real estate and all of Borrower's estate, right, title and interest therein, located in the county of Sacramento, state of California, more particularly described in Exhibit A attached hereto and made a p art hereof (the "Land"), which Land, together with the following described property, rights and interests, is collectively referred to herein as the "Premises".

D.

Together with Borrower's interest as lessor in and to all Leases and all Rents, which are pledged primarily and on a parity with the Land and not secondarily.

E.

Together with all and singular the tenements, hereditaments, easements, appurtenances, passages, waters, water courses, riparian rights, direct flow, ditch, reservoir, well and other water rights, whether or not adjudicated, whether tributary or nontributary and whether evidenced by deed, water stock, permit or otherwise, sewer rights, rights in trade names, licenses, permits and contracts, and all other rights, liberties and privileges of any kind or character in any way now or hereafter appertaining to the Land, including but not limited to, homestead and any other claim at law or in equity as well as any after-acquired title, franchise or license and the reversion and reversions and remainder and remainders thereof.

F.

Together with the right in the case of foreclosure hereunder of the encumbered property for Lender to take and use the name by which the buildings and all other improvements situated on the Premises are commonly known and the right to manage and operate the said buildings under any such name and variants thereof.

G.

Together with all right, title and interest of Borrower in any and all buildings and improvements of every kind and description now or hereafter erected or placed on the said Land and all materials intended for construction, reconstruction, alteration and repairs of such buildings and improvements now or hereafter erected thereon, all of which materials shall be deemed to be included within the Premises immediately upon the delivery thereof to the Premises, and all fixtures now or hereafter owned by Borrower and attached to or contained in and used exclusively in connection with the Premises including, but not limited to, all machinery,

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motors, elevators, fittings, radiators, awnings, shades, screens, all gas and electric fixtures, appliances (including without limitation, ranges, rangetops, ovens, stoves, cooking apparatus and appurtenances, dishwashers, refrigerators, trash compactors, microwaves, washers, dryers, and garbage disposals), water heaters, mirrors, mantels, carpeting and all other floor coverings, window coverings and treatments, cable television equipment, water softeners, storm sashes, and all plumbing, heating, lighting, ventilating, refrigerating, incinerating, air-conditioning and sprinkler equipment and fixtures and appurtenances thereto; and all items of furniture, furnishings, equipment and personal property owned by Borrower used exclusively in the operation of the Premises; and all renewals or replacements of all of the aforesaid property owned by Borrower or articles in substitution therefor, whether or not the same are or shall be attached to said buildings o r improvements in any manner (collectively, the "Improvements"); it being mutually agreed, intended and declared that all the aforesaid property owned by Borrower and placed by it on the Land or used exclusively in connection with the operation or maintenance of the Premises shall, so far as permitted by law, be deemed to form a part and parcel of the Land and for the purpose of this Deed of Trust to be Land and covered by this Deed of Trust, and as to any of the property aforesaid which does not form a part and parcel of the Land or does not constitute a "fixture" (as such term is defined in the Uniform Commercial Code ("UCC")), this Deed of Trust and the other Loan Documents (the terms of which grant a security interest in personal property or real property, the proceeds of which may become personal property) are each hereby deemed to be, as well, a security agreement under the UCC for the purpose of creating a security interest in all items, including, but not limited to, all property and rights which Borrower may grant, assign, bargain, sell, transfer, set over, deliver, or otherwise convey to Lender, as secured party, under the terms of this Deed of Trust or any of the other Loan Documents, including any and all proceeds thereof (as used herein, Borrower shall mean "Debtor" under the UCC and Lender shall mean "Secured Party" under the UCC).  Borrower hereby appoints Lender as its attorney-in-fact to execute such documents necessary to perfect Lender's security interest and authorizes Lender at any time until the Indebtedness is paid in full, to prepare and file, at Borrower's expense, any and all UCC financing statements, amendments, assignments, terminations and the like, necessary to create and/or maintain a prior security interest in such property all without Borrower's execution of the same.  Furthermore, upon a default under the Loan Documents, Lender will, in addition to all other remedies provided for in the Loan Documents, have the remedies provided for under the UCC in effect in the state in which the Premises is located.

H.

Together with all right, title and interest of Borrower, now or hereafter acquired, in and to any and all strips and gores of land adjacent to and used in connection with the Premises and all right, title and interest of Borrower, now owned or hereafter acquired, in, to, over and under the ways, streets, sidewalks and alleys adjoining the Premises.  

I.

Together with all funds now or hereafter held by Lender under any property reserves agreement (including any proceeds derived from any letter of credit) or escrow security agreement or under any of the terms hereof or of the Loan Documents, including but not limited to funds held under the provisions of paragraph 5 hereof.

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J.

Together with all of Borrower's payment intangibles, letter of credit rights, interest rate cap agreements, tenant in common agreement rights, and any other contract rights of Borrower related in any manner to the ownership, operation, or management of the Premises, as well as any and all supporting obligations, and all proceeds, renewals, replacements and substitutions thereof.

K.

Together with all funds, accounts and proceeds thereof relating to the Premises whether or not such funds, accounts or proceeds thereof are held by Lender under the terms of any of the Loan Documents, including, but not limited to bankruptcy claims of Borrower against any tenant at the Premises, and any proceeds thereof; proceeds of any Rents, insurance proceeds from all insurance policies required to be maintained by Borrower under the Loan Documents and all awards, decrees, proceeds, settlements or claims for damage now or hereafter made to or for the benefit of Borrower by reason of any damage to, destruction of or taking of the Premises or any part thereof, whether the same shall be made by reason of the exercise of the right of eminent domain or by condemnation or otherwise (a "Taking").

L.

TO HAVE AND TO HOLD the same unto Trustee, Trustee's successors and assigns, upon the trusts, covenants and agreements herein expressed.  

M.

Borrower represents that it is the absolute owner in fee simple of the Premises described in Exhibit A, which Premises are free and clear of any liens or encumbrances except as set forth in the loan policy of title insurance for the Premises issued to Lender, and except for taxes which are not yet due or delinquent.  Borrower shall forever warrant and defend the title to the Premises against all claims and demands of all persons whomsoever and will on demand execute any additional instrument which may be required to give Trustee a valid first lien on all of the Premises, subject to the "Permitted Encumbrances" set forth in the loan policy of title insurance for the Premises issued to Lender.  

N.

Borrower further represents that (i) the Premises is not subject to any casualty damage; (ii) Borrower has not received any written notice of any eminent domain or condemnation proceeding affecting the Premises; (iii) all leasing broker fees and commissions payable by Borrower with respect to the Lease(s) have been paid in full, in cash or other form of immediately available funds; (iv) to the best of Borrower's knowledge, following due and diligent inquiry, there are no actions, suits or proceedings pending, completed or threatened against or affecting Borrower or any person or entity owning an interest (directly or indirectly) in Borrower ("Interest Owner(s)") or any property of Borrower or any Interest Owner in any court or before any arbitrator of any kind or before or by any governmental authority (whether local, state, federal or foreign) that, individually or in the aggregate, could reasonably be expected by Len der to be material to the transaction contemplated hereby and (v) the Premises and the intended uses thereof are in compliance with all applicable laws, regulations and ordinances, including without limitation, the Americans with Disabilities Act of 1990 (42 U.S.C. §12101, et seq.), the Federal Architectural Barriers Act (42 U.S.C. §3601, et seq.), the Fair Housing Amendments Act of 1988

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(42 U.S.C. §3601, et seq.), and the Rehabilitation Act of 1973 (29 U.S.C. §794) and any amendments, modifications or supplements thereto.

O.

Borrower further represents and warrants that as of the date hereof and until the Indebtedness is paid in full

(a)

Borrower and each person or entity owning an interest in Borrower is not and will not be (i) identified on the Specially Designated Nationals and Blocked Persons List maintained by the Office of Foreign Assets Control, Department of the Treasury ("OFAC") and/or on any other similar list maintained by OFAC pursuant to any authorizing statute, executive order or regulation (collectively, the "List"), (ii) a person or entity with whom a citizen of the United States is prohibited to engage in transactions by any trade embargo, economic sanction, or other prohibition of United States law, regulation, or Executive Order of the President of the United States;

(b)

none of the funds or other assets of Borrower constitute or will constitute property of, or are or will be beneficially owned, directly or indirectly, by any Embargoed Person (as hereinafter defined);

(c)

no Embargoed Person has or will have any interest of any nature whatsoever in Borrower (whether directly or indirectly);

(d)

none of the funds of Borrower have been or will be derived from any unlawful activity with the result that the investment in Borrower is prohibited by law or that the Loan Documents are in or will be in violation of law,

(e)

Borrower has and will continue to implement procedures, and has consistently and will continue to consistently apply those procedures, to ensure the foregoing representations and warranties remain true and correct at all times.  The term "Embargoed Person" means any person, entity or government subject to trade restrictions under U.S. law, including but not limited to, the International Emergency Economic Powers Act, 50 U.S.C. §1701 et seq., The Trading with the Enemy Act, 50 U.S.C. App. 1 et seq., and any Executive Orders or regulations promulgated thereunder with the result that the investment in Borrower is prohibited by law or Borrower is in violation of law;

(f)

Borrower has complied and will continue to comply with all requirements of law relating to money laundering, anti-terrorism, trade embargos and economic sanctions, now or hereafter in effect;

(g)

Borrower has not and will not use funds from any "Prohibited Person" (as such term is defined in the September 24, 2001 Executive Order Blocking Property and

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Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism) to make any payment due to Lender under the Loan Documents

Borrower will immediately notify Lender in writing if any of the representations, warranties or covenants are no longer true or have been breached or if Borrower has a reasonable basis to believe that they may no longer be true or have been breached.  In addition, Borrower will, at the request of Lender, provide such information as may be requested by Lender to determine Borrower's compliance with the terms hereof.

P.

Borrower further represents and warrants that as of the date hereof and until the Indebtedness is paid in full: (i) Borrower is not and will not be an "employee benefit plan" as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), which is subject to Title I of ERISA; (ii) the assets of Borrower do not and will not constitute "plan assets" of one or more such plans for purposes of Title I of ERISA; (iii) Borrower is not and will not be a "governmental plan" within the meaning of Section 3(32) of ERISA; (iv) transactions by or with Borrower are not and will not be subject to state statutes applicable to Borrower regulating investments of and fiduciary obligations with respect to governmental plans; (v) Borrower has made and will continue to make all required contributions to all employee benefit plans, if any, established for or on behalf of Borrower or to which Borrower is required to contribute; (vi) Borrower has and will continue to administer each such plan, if any, in accordance with its terms and the applicable provisions of ERISA and any other federal or state law; and (vii) Borrower has not and will not permit any liability under Sections 4201, 4243, 4062 or 4069 of Title IV of ERISA or taxes or penalties relating to any employee benefit plan or multi-employer plan to become delinquent or assessed, respectively, which would have a material adverse effect upon (i) the business or the financial position or results of operation of Borrower, (ii) the ability of Borrower to perform, or of Lender to enforce, any of the Loan Documents or Environmental Indemnity, or (iii) the value of the Premises.

BORROWER COVENANTS AND AGREES AS FOLLOWS:  

1.

Borrower shall

(a)

pay each item of Indebtedness secured by this Deed of Trust when due according to the terms of the Loan Documents;

(b)

pay a Late Charge on any payment of principal, interest, Make Whole Premium or Indebtedness which is not paid on or before the due date thereof to cover the expense involved in handling such late payment;

(c)

pay on or before the due date thereof any indebtedness permitted to be incurred by Borrower pursuant to the Loan Documents and any other claims which could become a lien on the Premises (unless otherwise

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specifically addressed in paragraph 1(e) hereof), and upon request of Lender exhibit satisfactory evidence of the discharge thereof;

(d)

complete within a reasonable time, the construction of any Improvements now or at any time in process of construction upon the Land;

(e)

manage, operate and maintain the Premises and keep the Premises, including but not limited to, the Improvements, in good condition and repair and free from mechanics' liens or other liens or claims for liens, provided however, that Borrower may in good faith, with reasonable diligence and upon written Notice to Lender within thirty (30) days after Borrower has knowledge of such lien or claim, contest the validity or amount of any such lien or claim and defer payment and discharge thereof during the pendency of such contest in the manner provided by law, provided that (i) such contest may be made without the payment thereof; (ii) such contest shall prevent the sale or forfeiture of the Premises or any part thereof, or any interest therein, to satisfy such lien or claim; (iii) Borrower shall have obtained a bond over such lien or claim from a bonding company acceptable to Lender which has the effect of removing such lien or collection of the claim or lien so contested; and (iv) Borrower shall pay all costs and expenses incidental to such contest; and further provided, that in the event of a final, non-appealable ruling or adjudication adverse to Borrower, Borrower shall promptly pay such claim or lien, shall indemnify and hold Lender and the Premises harmless from any loss or damage arising from such contest and shall take whatever action necessary to prevent sale, forfeiture or any other loss or damage to the Premises or to the Lender;  

(f)

comply, and cause each lessee or other user of the Premises to comply, with all requirements of law and ordinance, and all rules and regulations, now or hereafter enacted, by authorities having jurisdiction of the Premises and the use thereof, including but not limited to all covenants, conditions and restrictions of record pertaining to the Premises, the Improvements, and the use thereof (collectively, "Legal Requirements");

(g)

subject to the provisions of paragraph 6 hereof, promptly repair, restore or rebuild any Improvements now or hereafter a part of the Premises which may become damaged or be destroyed by any cause whatsoever, so that upon completion of the repair, restoration and rebuilding of such Improvements, there will be no liens of any nature arising out of the construction and the Premises will be of substantially the same character and quality as it was prior to the damage or destruction;

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(h)

if other than a natural person, do all things necessary to preserve and keep in full force and effect its existence, franchises, rights and privileges under the laws of the state of its formation and, if other than its state of formation, the state where the Premises is located.  Borrower shall notify Lender at least thirty (30) days prior to (i) any relocation of Borrower's principal place of business to a different state or any change in Borrower's state of formation, and/or (ii) if Borrower is an individual, any relocation of Borrower's principal residence to a different state;

(i)

do all things necessary to preserve and keep in full force and effect Lender's title insurance coverage insuring the lien of this Deed of Trust as a first and prior lien, subject only to the Permitted Encumbrances stated in the title insurance policy issued to Lender and any other exceptions after the date of this Deed of Trust approved in writing by Lender, including without limitation, delivering to Lender not less than 30 days prior to the effective date of any rate adjustment, modification or extension of the Note or any other Loan Document, any new policy or endorsement which may be reasonably required to assure Lender of such continuing coverage;

(j)

execute any and all documents which may be required to perfect the security interest granted by this Deed of Trust; and

(k)

comply and cause the Premises and the intended uses thereof to comply with all laws, rules, and regulations affecting the Premises or any portion thereof or any use thereof and, upon request by Lender, provide Lender with such evidence as may be reasonably required by Lender to confirm such compliance, such evidence to include, without limitation, letters, licenses, permits, certificates and other correspondence from the appropriate governmental authorities, and opinions or certifications from architects or engineers.  The laws, regulations and ordinances with which compliance should be evidenced include, in addition to the foregoing and without limitation, the following:  building codes, health and environmental protection laws, erosion control ordinances, federal statutes, doing business and/or licensing laws and zoning laws (the evidence submitted as to zoning should include the zoning designation made for the Premises, the permitted uses of the Premises under such zoning designation and zoning requirements as to parking, lot size, ingress, egress and building setbacks).

(l)

in the event Permitted Transfer (viii) of paragraph 2(f) occurs, remain a Single-Asset Entity;  

As used herein, the term Single-Asset Entity means:

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a corporation, limited or general partnership, limited liability company, or business trust which, at all times until the Indebtedness is paid in full (i) will not have any other assets other than the Premises, cash and marketable securities, and (ii) will not create, assume, incur, guarantee or become liable for debt, obligations, or performance of obligations for the benefit of any other person or entity except for liabilities incurred in the normal operation of the Premises (other than liabilities secured by the Premises).

2.

Borrower shall not:

(a)

except as required by applicable Legal Requirements, construct any building or structure nor make any alteration or addition (other than normal repair and maintenance) to (i) the roof or any structural component of any Improvements on the Premises, or (ii) the building operating systems, including but not limited to, the mechanical, electrical, heating, cooling, or ventilation systems (other than replacement with equal or better quality and capacity), without the prior written consent of Lender not to be unreasonably withheld;

(b)

remove or demolish any material Improvements, or any portion thereof, which at any time constitutes a part of the Premises.

Notwithstanding anything hereinabove to the contrary, Borrower may construct, remove or demolish tenant improvements within the then existing building(s) or other structures to the extent such work is required solely under the terms of any Leases approved by Lender provided (i) no Event of Default exists under the Loan Documents; (ii) the work is completed on a timely basis, in a good, workmanlike, lien-free manner and in accordance with all Legal Requirements, and (iii) such work does not negatively affect the structural integrity of the Improvements or the value of the Premises;

(c)

cause or permit any change to be made in the general use of the Premises without Lender's prior written consent;

(d)

initiate any or acquiesce to a zoning reclassification or material change in zoning without Lender's prior written consent.  Borrower shall use all reasonable efforts to contest any such zoning reclassification or change;

(e)

make or permit any use of the Premises that could with the passage of time result in the creation of any right of use, or any claim of adverse

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possession or easement on, to or against any part of the Premises in favor of any person or entity or the public;

(f)

allow any of the following to occur (unless a Permitted Transfer):

(i)

a Transfer of all or any portion of the Premises or any interest in the Premises;

(ii)

a Transfer of any ownership interest in Borrower or any entity which owns, directly or indirectly, an interest in Borrower at any level of the ownership structure; or

(iii)

in addition to (i) and (ii) above, if the Borrower is a trust, or if a trust owns an interest, directly or indirectly, in any entity which owns an interest in Borrower at any level of the ownership structure, the addition, deletion or substitution of a trustee of such trust.  

If any of such events occur, it shall be null and void and shall constitute an Event of Default under the Loan Documents.

It is understood and agreed that the Indebtedness evidenced by the Note is personal to Borrower and in accepting the same Lender has relied upon what it perceived as the willingness and ability of Borrower to perform its obligations under the Loan Documents and the Environmental Indemnity and as lessor under the Leases of the Premises.  Furthermore, Lender may consent to a Transfer and expressly waive Borrower's covenants contained in this paragraph 2(f), in writing to Borrower; however any such consent and waiver shall not constitute any consent or waiver of such covenants as to any Transfer other than that for which the consent and waiver was expressly granted.  Furthermore, Lender's willingness to consent to any Transfer and waive Borrower's covenants contained in this paragraph 2(f), implies no standard of reasonableness in determining whether or not such consent shall be granted and the same may be based upon what Lend er solely deems to be in its best interest.

For purposes of the Loan Documents, the following terms shall have the respective meanings set forth below:

"Transfer" or "Transferred" shall mean with respect to the Premises, an interest in the Premises, or an ownership interest or interest therein:

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(i)

a sale, assignment, transfer, conveyance or other disposition (whether voluntary, involuntary or by operation of law);

(ii)

the creation, sufferance or granting of any lien, encumbrance, security interest or collateral assignment (whether voluntarily, involuntarily or by operation of law), other than the lien hereof, the leases of the Premises assigned to Lender, the Permitted Encumbrances and those liens which Borrower is contesting in accordance with the provisions of paragraph 1(e);

(iii)

the issuance or other creation of ownership interests in an entity;

(iv)

the reconstitution or conversion from one entity to another type of entity;

(v)

a merger, consolidation, reorganization or any other business combination; or

(vi)

a conversion to or operation of all or any portion of the Premises as a cooperative or condominium form of ownership.

"Permitted Transfer" shall mean:

(i)

a minor (as determined by Lender) conveyance of an interest in the Premises by Borrower, such as a utility easement, and for which Lender has given its prior written consent and imposed such conditions as Lender deems advisable and appropriate;

(ii)

a sale, assignment, transfer or conveyance of all or any portion of the Premises or an interest in the Premises for which Borrower has complied with all of the Property Transfer Requirements;

(iii)

any of the following Transfers for which Borrower has complied with all of the Ownership Transfer Requirements as applicable and Lender has given its prior written consent (and in connection with such consent, Lender may impose any conditions it wishes in its reasonable discretion);

(A)

a sale, assignment, transfer, or conveyance of an ownership interest or interest therein;

(B)

the issuance or other creation of ownership interests in an entity;

(C)

a reconstitution or conversion from one entity to another type of entity;

(D)

a merger, consolidation, reorganization or any other business combination;

(iv)

transfers of general partner interest in Borrower between VMS National Residential Portfolio I and VMS National Residential Portfolio II ("Borrower Interest Owners") for which Borrower has complied with all of the Specific Transfer Requirements I;

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(v)

transfers of general partner interests in Borrower that represent less than 49%, individually or in the aggregate, of all ownership interests in Borrower to individuals or entities other than Borrower Interest Owners for which Borrower has complied with all of the Specific Transfer Requirements II;

(vi)

Borrower's right to obtain mezzanine financing for which Borrower has complied with all the Mezzanine Financing Requirements;

(vii)

any assumption of less than 100% of the limited partnership interests in Borrower Interest Owners by any affiliate of AIMCO REIT for which Borrower has complied with all of the Specific Transfer Requirements III;

(viii)

conversion of the Borrower to a Single Asset Entity (as defined in paragraph 1(l)) wholly owned by AIMCO REIT and/or AIMCO OP and transfer of the Premises to said Single Asset Entity for which Borrower has complied with all of the Specific Transfer Requirements IV;

(ix)

a transfer of any general partnership interest in Borrower to a Qualified REIT Subsidiary, as defined in Section 856(i)(2) of the Internal Revenue Code of 1986, 100% owned by AIMCO REIT or to a Qualified REIT Subsidiary, as defined in Section 856(e)(1) of the Internal Revenue Code of 1986, 100% owned by AIMCO OP for which Borrower has complied with all of the Specific Transfer Requirements V;

(ix)

a transfer of shares of common stock, limited partnership interests or other beneficial or ownership interests or other forms of securities in AIMCO REIT or AIMCO OP (defined below), and the issuance of all varieties of convertible debt, equity and other similar securities of AIMCO REIT or AIMCO OP, and the subsequent transfer of such securities; provided, however, that no Change of Control (defined below) occurs as a result of such transfer, either upon such transfer or upon the subsequent conversion to equity of such convertible debt or other securities.

(x)

The issuance by AIMCO REIT or AIMCO OP of additional common stock, limited partnership interests or other beneficial or ownership interests, convertible debt, equity and other similar securities, and the subsequent transfer of such convertible debt or securities; provided, however, that no Change of Control occurs as the result of such transfer, either upon such transfer or upon the subsequent conversion to equity of such convertible debt or other securities.

(xi)

So long as AIMCO REIT owns 100% of the stock of AIMCO-LP, Inc. and AIMCO-GP, Inc. (and AIMCO-GP, Inc. remains the general partner of AIMCO OP), a transfer of limited partnership

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interests that results in AIMCO-LP, Inc. owning not less than 50.1% of the limited partnership interests in AIMCO OP.

For purposes of this Permitted Transfer Section, the following terms shall

be defined as follows:

(A)

"Change of Control" shall mean the earliest to occur of (1) the date an Acquiring Person becomes (by acquisition, consolidation, merger or otherwise), directly or indirectly, the beneficial owner of more than forty percent (40%) of the total Voting Equity Capital of AIMCO REIT then outstanding, or (2) the date on which AIMCO REIT shall cease to hold (whether directly or indirectly through a wholly owned intermediary entity such as AIMCO-LP, Inc. or AIMCO-GP, Inc.) at least 50.1% of the limited partnership interests in AIMCO OP, or (3) the date on which AIMCO REIT shall cease for any reason to hold (whether directly or indirectly) (i) the interests in the Managing General Partner held as of the date of this Deed of Trust (as evidenced by organizational charts and documents submitted to Lender as of such date) and (ii) the Controlling Interest(s) in the Borrower, or (4) the replacement (other than solely by reason of retireme nt at age sixty-five or older, death or disability) of more than 50% (or such lesser percentage as is required for decision making by the board of directors of trustees, if applicable) of the members of the board of directors (or trustee, if applicable) of AIMCO REIT over a one-year period where such replacement shall not have been approved by a vote of at least a majority of the board of directors (or trustees, if applicable) of AIMCO REIT then still in office who either were members of such board of directors (or trustees, if applicable) at the beginning of such one year period or whose election as members of the board of directors (or trustees, if applicable) was previously so approved.

(B)

"Acquiring Person" shall mean a "person" or, group of "persons" within the meaning of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended. However, notwithstanding the foregoing, "Acquiring Person" shall not be deemed to include any member of the Borrower Control Group unless such member has, directly or indirectly, disposed of, sold or otherwise transferred to,

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or encumbered or restricted (whether by means of voting trust agreement or otherwise) for the benefit of an Acquiring Person, all or any portion of the Voting Equity Capital of AIMCO RElT directly or indirectly owned or controlled by such member or such member directly or indirectly votes all or any portion of the Voting Equity Capital of AIMCO REIT, directly or indirectly, owned or controlled by such member for the taking of any action which, directly or indirectly constitutes or would result in a Change of Control, in which event such member of the Borrower Control Group shall be deemed to constitute an Acquiring Person to the extent of the Voting Equity Capital of AIMCO REIT owned or controlled by such member.

(C)

"Borrower Control Group" shall mean a majority of the Board of Directors of AIMCO REIT.

(D)

A "Person" shall mean an individual, an estate, a trust, a corporation, a partnership, a limited liability company or any other organization or entity (whether governmental or private).

(E)

"Security" shall have the same meaning as in Section 2(1) of the Securities Act of 1933, as amended.

(F)

"Controlling Interest(s)" shall mean (i) with respect to a partnership, such majority and/or managing general partner interests which, together with a majority of limited partnership interests if necessary for consent purposes, vest in the holder of such interests the sale power, right and authority to control the day to day operations of the Borrower; including, without limitation, the authority to manage, operate and finance the Premises, (ii) with respect to a corporation, the number of shares which entitle the holder to elect a majority of the board of directors of the Borrower, and (iii) with respect to a limited liability company, such majority and/or managing member interests as vest in the holder of such interests the sole power, right and authority to control the day to day operations of the Borrower; including, without limitation, the authority to manage, operate and finance the Premises.

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(G)

"AIMCO REIT" shall mean Apartment Investment and Management Company, a corporation organized and existing under the laws of the State of Maryland.

(H)

"AIMCO OP" shall mean AIMCO Properties, L.P., a limited partnership organized and existing under the laws of the State of Delaware.

(I)

"Managing General Partner" shall mean the entity executing this Deed of Trust on behalf of the Borrower and/or its successors or assigns in interest.

(J)

"Voting Equity Capital" shall mean securities of any class or classes, the holders of which are ordinarily, in the absence of contingencies, entitled to elect a majority of the board of directors (or Persons performing similar functions).

"Property Transfer Requirements" are all of the following:

1.

Prior review and approval of the proposed purchaser or other transferee and the subject transaction by Lender, at Lender's reasonable discretion.  Review of the proposed purchaser or other transferee and the subject transaction shall encompass various factors, including, but not limited to, the proposed purchaser's or other transferee's creditworthiness, financial strength, and real estate management and leasing expertise as well as the proposed transaction's effect on the Premises, the Borrower, and other security for the Loan;

2.

Payment to Lender of an assumption fee equal to one percent (1%) of the principal balance of the Note; provided, however, that Lender will require up to $15,000.00 of such fee to be paid at the beginning of Lender's review process, and such sum shall be nonrefundable and earned upon receipt by Lender whether or not the transaction is ultimately completed or Lender ultimately approves the proposed purchaser or other transferee;

3.

Receipt, at Borrower's expense, of either (at Lender's discretion) a new ALTA standard loan policy or an endorsement updating the Lender's existing loan policy in the full amount of the Loan, in form and by an issuer satisfactory to Lender, and which insures this Deed of Trust to be a first and prior lien subject only to those

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exceptions which were previously approved by Lender and provides coverage against usury and mechanic's liens;

4.

Receipt by Lender of copies of all relevant information and documentation relating to or required by Lender in connection with the proposed transfer including but not limited to (a) the organizational documents of the proposed transferee and an opinion of counsel satisfactory to Lender as to its due formation, valid existence and authority to enter into and carry out the proposed transaction; (b) the deeds or other instruments of transfer and documents relating to the assignment and assumption of Leases; (c) evidence of compliance with the insurance requirements contained in the Loan Documents; and (d) compliance with such other closing requirements as are customarily imposed by Lender in connection with such transactions;

5.

Execution, delivery, acknowledgment and recordation, as applicable, of new, revised and/or replacement assumption agreements, loan modification agreements, indemnification agreements, escrow security or property reserves agreements, security instruments, financing statements, UCCs, new or revised letters of credit and/or guarantees in form and substance reasonably satisfactory to Lender;

6.

Payment of outside counsel fees and costs, other applicable professional's fees and costs, taxes, recording fees and the like, and any other fees and costs incurred; and

7.

Receipt by Lender of 60 days advance written notice of the proposed Transfer in question.

"Ownership Transfer Requirements" are all of the Property Transfer Requirements which Lender deems appropriate in its reasonable discretion, as well as a reasonable processing fee to be determined by Lender; provided, however, that (i) with respect to item 2 of the Property Transfer Requirements, the 1% fee shall be prorated (subject, however, to a $15,000 minimum) based on Lender's calculation of the effective percentage interest in Borrower transferred, and (ii) item 3 of the Property Transfer Requirements shall be required, at Lender's reasonable discretion, only in the event of (A) a merger, consolidation, reorganization or any other business combination, or (B) a reconstitution or conversion from one entity to another type of entity.

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"Specific Transfer Requirements I" are all of the following:  

1.

AIMCO REIT (as defined below) and/or AIMCO OP (as defined below) (collectively) retain 20% indirect ownership interest in and retain management and control of Borrower and there is no change in the management and day-to-day operations at the Premises, unless otherwise approved by Lender;

2.

Lender receives notice of such transfer within thirty (30) days of the consummation of such transfer; and

3.

Lender receives an organizational chart for Borrower which includes ownership breakdowns for all entity levels and is certified by Borrower as true and correct.

Specific Transfer Requirements II are all of the following:

1.

AIMCO REIT and/or AIMCO OP (collectively) retain 20% indirect ownership interest in and retain management and control of Borrower and there is no change in the management and day-to-day operations at the Premises, unless otherwise approved by Lender;

2.

Lender receives notice of such transfer within thirty (30) days of the consummation of such transfer along with the organizational documents of the transferee;

3.

At Lender's option, Lender receives an acceptable background and credit check, at Borrower's cost, for the proposed transferee if said proposed transferee's interest in Borrower will equal or exceed 20%;

4.

At Lender's option, Lender receives an acceptable OFAC report (research of the Office of Foreign Assets Control "Watched" companies list), at Borrower's cost;

5.

Lender receives an organizational chart for Borrower which includes ownership breakdowns for all entity levels and is certified by Borrower as true and correct; and

6.

Lender receives payment of an assumption fee equal to the greater of: (a) one-half percent (0.5%) of the outstanding principal balance of the Note prorated based on Lender's calculation of the effective percentage interest in Borrower transferred; or (b) $3,000.00.

Specific Transfer Requirements III are all of the following:

1.

AIMCO REIT and/or AIMCO OP (collectively) retain 20% indirect ownership interest in and retain management and control of Borrower and there is no change in the management and day-to-day operations at the Premises, unless otherwise approved by Lender;

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2.

Lender receives notice of such transfer within thirty (30) days of the consummation of such transfer;

3.

Lender receives an organizational chart for Borrower which includes ownership breakdowns for all entity levels and is certified by Borrower as true and correct; and

4.

Lender receives a processing fee of $500.00.

Specific Transfer Requirements IV are all of the following:

1.

Property Transfer Requirements 3-7; and

2.

Lender receives a processing fee of $3,000.00.

Specific Transfer Requirements V are all of the following:

1.

AIMCO REIT and/or AIMCO OP (collectively) retain 20% indirect ownership interest in and retain management and control of Borrower and there is no change in the management and day-to-day operations at the Premises, unless otherwise approved by Lender;

2.

Lender receives notice of such transfer within thirty (30) days of the consummation of such transfer along with the organizational documents of the transferee;

3.

At Lender's option, Lender receives an acceptable background and credit check, at Borrower's cost, for the proposed transferee if said proposed transferee's interest in Borrower will equal or exceed 20%;

4.

At Lender's option, Lender receives an acceptable OFAC report (research of the Office of Foreign Assets Control "Watched" companies list), at Borrower's cost;

5.

Lender receives an organizational chart for Borrower which includes ownership breakdowns for all entity levels and is certified by Borrower as true and correct; and

6.

Lender receives payment of a processing fee of $1,000.00.

"Mezzanine Financing Requirements" are all of the following:

(i)

no Event of Default has occurred under the Loan Documents;

(ii)

the mezzanine borrower may not be Borrower;

(iii)

the mezzanine debt is used solely to reimburse the mezzanine borrower for the costs associated with the repair and/or improvement of the Premises subject to the terms and conditions of the Loan Documents;

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(iv)

the combined outstanding Indebtedness on the Loan and proposed mezzanine financing does not exceed eighty percent (80%) of the appraised value of the Premises as calculated by Lender at the time of funding of the mezzanine financing or at Lender's option as established by an appraisal of the Premises prepared by an MAI appraiser approved by Lender and in form and substance acceptable to Lender, which appraisal shall be paid for by Borrower;

(v)

a minimum of 1.05 debt service coverage, based on a 30-year amortization schedule, is maintained.  The debt service coverage shall be the annual net cash flow (annual net operating income after deduction for tenant improvements, leasing commissions, annual replacement reserves and a management fee) divided by the total annual installment payments due under the Note secured hereby and on any proposed mezzanine financing including accrued or capitalized interest.  Only net operating income from approved executed leases in effect on the Premises with no uncured defaults shall be used in Lender's determination of the annual net cash flow;  

(vi)

the only security for the mezzanine financing is a pledge of ownership interests in Borrower or an owner of Borrower, directly or indirectly and such financing does not encumber nor result in any lien or charge upon or against the Premises or the Rents; and

(vii)

Lender's reasonable approval of the mezzanine lender as well as any successor or assign of mezzanine lender, any of which must be an institutional lender;

(viii)

Lender's reasonable approval of the mezzanine financing loan documents;

(ix)

Execution by the mezzanine lender of an inter-creditor agreement in form and substance acceptable to Lender;

(x)

neither Guarantor nor Borrower may be a guarantor of the mezzanine financing;

(xi)

at Lender's option, if required by the procedures promulgated by any rating agency(s) associated with a securitization transaction, evidence in writing to the effect that such mezzanine financing will not result in a re-qualification, reduction or withdrawal of any

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rating in effect immediately prior to the obtaining of the mezzanine financing issued in connection with the applicable securitization transaction;

(xii)

Borrower pays to Lender a reasonable fee for the handling and processing of such financing and reimburses Lender for all costs and expenses incurred by Lender, including but not limited to outside counsel fees and costs; and

(xiii)

the right to obtain mezzanine debt is personal to VMS National Properties and any successor borrower directly or indirectly wholly owned by AIMCO REIT and/or AIMCO OP and may not be exercised by any successor or assign of Borrower other than a successor borrower directly or indirectly wholly owned by AIMCO REIT and/or AIMCO OP.

(g)

allow all or any portion of the Premises to be operated as or converted to a cooperative or condominium form of ownership;

(h)

amend, alter, modify, terminate or assign that certain Property Management Agreement by and between Borrower, and NHPMN Management, LP dated January 1, 2003 as amended by Amendment of Management Agreement dated November 9, 2006, now in existence or any subsequent agreement hereafter entered into with respect to the Premises (the "Property Management Agreement");

(i)

permit the property and leasing manager to assign or sell the Property Management Agreement; or

(j)

replace the current property and leasing manager or Property Management Agreement without the prior consent of Lender.

3.

(a)

Borrower shall pay or cause to be paid when due and before any penalty attaches or interest accrues all general taxes, special taxes, assessments (including assessments for benefits from public works or improvements whenever begun or completed), utility charges, water charges, sewer service charges, common area maintenance charges, if any, vault or space charges and all other like charges against or affecting the Premises or against any property or equipment located on the Premises, or which might become a lien on the Premises, and shall, within 15 days following Lender's request, furnish to Lender a duplicate receipt of such payment.  If any such tax, assessment or charge may legally be paid in installments,

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Borrower may, at its option, pay such tax, assessment or charge in installments.  

(b)

If Borrower desires to contest any tax, assessment or charge relating to the Premises, Borrower may do so by paying the same in full, under protest, in the manner provided by law; provided, however, that

(i)

if contest of any tax, assessment or charge may be made without the payment thereof, and

(ii)

such contest shall have the effect of preventing the collection of the tax, assessment or charge so contested and the sale or forfeiture of the Premises or any part thereof or any interest therein to satisfy the same,

then Borrower may in its discretion and upon the giving of written notice to Lender of its intended action and upon the furnishing to Lender of such security or bond as Lender may require, contest any such tax, assessment or charge in good faith and in the manner provided by law.  All costs and expenses incidental to such contest shall be paid by Borrower.  In the event of a ruling or adjudication adverse to Borrower, Borrower shall promptly pay such tax, assessment or charge.  Borrower shall indemnify and save harmless the Lender and the Premises from any loss or damage arising from any such contest and shall, if necessary to prevent sale, forfeiture or any other loss or damage to the Premises or to Lender, pay such tax, assessment or charge or take whatever action is necessary to prevent any sale, forfeiture or loss.  

4.

(a)

Borrower shall at all times keep or cause to be kept in force (i) property insurance insuring all Improvements which now are or hereafter become a part of the Premises for perils covered by a causes of loss-special form insurance policy, including coverage against terrorism and containing replacement cost, ordinance and law and agreed amount endorsements or equivalent coverage; (ii) commercial general liability insurance naming Lender as an additional insured protecting Borrower and Lender against liability for bodily injury or property damage occurring in, on or adjacent to the Premises, with a combined single limit of not less than One Million Dollars ($1,000,000) per occurrence with not less than a Two Million Dollar ($2,000,000) aggregate limit and excess umbrella liability insurance of not less than Fifteen Million Dollars ($15,000,000); (iii) boiler and machinery insurance if the property has a boiler or is an office building; (iv) rental value insurance for the perils specified herein for one hundred percent (100%) of the Rents (including operating expenses, real estate

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taxes, assessments and insurance costs which are lessee's liability) for a period of twelve (12) months; (v) builders risk insurance during all periods of construction; and (vi) insurance against all other hazards as may be reasonably required by Lender, including, without limitation, insurance against loss or damage by flood.

(b)

All insurance (including deductibles and exclusions) shall be in form, content and amounts reasonably approved by Lender and written by an insurance company or companies approved by Lender and rated A-, class size VIII or better in the most current issue of Best's Insurance Reports and which is licensed to do business in the state in which the Premises are located or a governmental agency or instrumentality approved by Lender.  The policies for such insurance shall have attached thereto standard mortgagee clauses in favor of and permitting Lender to collect any and all proceeds payable thereunder and shall include a 30 day (except for nonpayment of premium, in which case, a 10 day) notice of cancellation clause in favor of Lender.  All certificates of insurance (or duplicate originals of policies if requested by Lender) shall be delivered to and held by Lender as further security for the payment of the Note and any other ob ligations arising under the Loan Documents, with evidence of renewal coverage delivered to Lender at least 30 days before the expiration date of any policy.  Borrower shall not carry or permit to be carried separate insurance, concurrent in kind or form and contributing in the event of loss, with any insurance required in the Loan Documents.

5.

(a)

Upon the occurrence of an Event of Default, Borrower shall deposit with and pay to Lender, on each payment date specified in the Note, sums calculated by Lender for payment of the following as they become due and payable:  (i) the estimated taxes and assessments assessed or levied against the Premises, and (ii) the estimated premiums for insurance required by the Loan Documents, excluding commercial general liability insurance.  Lender shall use such deposits to pay the taxes, assessments and premiums when the same become due.  Borrower shall procure and deliver to Lender, in advance, statements for such charges.  If the total payments made by Borrower under this paragraph exceed the amount of payments actually made by Lender for taxes, assessments and insurance premiums, such excess shall be credited by Lender on subsequent deposits to be made by Borrower.  If, however, the deposits are insufficient to pay t he taxes, assessments and insurance premiums when the same shall be due and payable, Borrower will pay to Lender any amount necessary to make up the deficiency, five (5) business days before the date when payment of such taxes, assessments and insurance premiums shall be due.  If at any time Borrower shall tender to Lender, in accordance with the provisions of

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the Note secured by this Deed of Trust, full payment of the entire Indebtedness represented thereby, Lender shall, in computing the amount of such Indebtedness, credit to the account of Borrower any balance remaining in the funds accumulated and held by Lender under the provisions of this paragraph.  If there is an Event of Default resulting in a public sale of the Premises, or if Lender otherwise acquires the Premises after an Event of Default, Lender shall apply, at the time of commencement of such proceedings, or at the time the Premises is otherwise acquired, the balance then remaining in the funds accumulated under this paragraph as a credit toward any delinquent or accrued taxes and then in such priority as Lender elects to the other Indebtedness.

(b)

Any funds held under this paragraph shall not constitute any deposit or account of the Borrower or moneys to which the Borrower is entitled upon demand, or upon the mere passage of time.  Lender shall not be required to segregate such deposits and may hold such deposits in its general account or any other account and may commingle such deposits with any other moneys of Lender or moneys which Lender is holding on behalf of any other person or entity.

6.

In the event of any damage to or destruction of the Premises, or any part thereof:

(a)

Borrower will immediately notify Lender thereof in the manner provided in this Deed of Trust for the giving of notices.  Lender shall have the right (which may be waived by Lender in writing) to settle and adjust any claim under such insurance policies required to be maintained by Borrower.  In all circumstances, the proceeds thereof shall be paid to Lender and Lender is authorized to collect and to give receipts therefor.  Borrower agrees and acknowledges that such proceeds shall be held by Lender without any allowance of interest and that in any bankruptcy proceeding of Borrower, all such proceeds shall be deemed to be "Cash Collateral" as that term is defined in Section 363 of the Bankruptcy Code.  Provided that no Event of Default exists, Borrower shall have the right to participate in any settlement or adjustment; provided, however, that any settlement or adjustment where the aggregate amount of suc h proceeds equals or exceeds $500,000 shall be subject to the written approval of Lender, not to be unreasonably withheld.

(b)

Such proceeds, after deducting therefrom any reasonable expenses incurred by Lender in the collection thereof (including but not limited to reasonable attorneys' fees and costs), shall be applied by Lender to pay the Indebtedness secured hereby including, but not limited to the Make Whole Premium, whether or not then due and payable, provided, however, that if

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no Event of Default exists at the time of such application or the application occurs during the Open Period, no Make Whole Premium shall be due.

Notwithstanding anything hereinabove to the contrary,

(i)

in the event the casualty occurs more than three (3) months prior to the Maturity Date and no Event of Default exists, Lender shall apply such proceeds as follows outlined below; provided, further, that Lender's rights in this subparagraph are subject to Borrower's rights to use such proceeds for rebuilding and restoring the buildings and improvements as may be required or permitted by law in effect at the time of the loss:

(A)

If the aggregate amount of such proceeds is less than $500,000, Lender shall pay such proceeds directly to Borrower, to be held in trust for Lender and applied to the cost of rebuilding and restoring the Premises.

(B)

If the aggregate amount of such proceeds equals or exceeds $500,000 Lender shall disburse such amounts of the proceeds as Lender reasonably deems necessary for the repair or replacement of the Premises, subject to the conditions set forth in 6(c) below.

(ii)

in the event (x) an Event of Default exists, or (y) the casualty occurs during the last three (3) months prior to the Maturity Date and Lender determines that the repair and restoration of such casualty cannot be completed prior to the Maturity Date, or (z) the conditions set forth in 6(c) are not met, then Lender, in its sole and absolute discretion may either:

(A)

declare the entire Indebtedness to be immediately due and payable, provided, however, that if no Event of Default exists or the loan term is in the Open Period, no Make Whole Premium shall be due.  All proceeds shall be applied toward payment of the Indebtedness in such priority as Lender elects; or

(B)

disburse such proceeds as Lender reasonably deems necessary for the repair or replacement of the Premises subject to those conditions set forth in 6(c) which Lender in its sole and absolute discretion may require.

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(c)

(i)

In the event that Borrower is to be reimbursed out of the insurance proceeds or out of any award or payment received with respect to a Taking, Lender shall from time to time make available such proceeds, subject to the following conditions: (a) there continues to exist no Event of Default; (b) the delivery to Lender of satisfactory evidence of the estimated cost of completion of such repair and restoration work and any architect's certificates, waivers of lien, contractor's sworn statements, and other evidence of cost and of payment and of the continued priority of the lien hereof over any potential liens of mechanics and materialmen (including, without limitation, title policy endorsements) as Lender may reasonably require and approve; (c) the time required to complete the repair and restoration work and for the income from the Premises to return to the level it was prior to the loss will not exceed the coverage period of the rental value insurance required hereunder; (d) the annual net operating income shall equal or exceed 1.20 times the annual debt service on the Note.  Only net operating income from approved executed Leases in effect on the Premises, with no uncured defaults, shall be used in Lender's determination of the annual net operating income; (e) Lender approves the plans and specifications of such work before such work is commenced if the estimated cost of rebuilding and restoration exceeds 25% of the Indebtedness or involves any structural changes or modifications, which approval shall not be unreasonably withheld; (f) if the amount of any insurance proceeds, award or other payment is insufficient to cover the cost of restoring and rebuilding the Premises, Borrower shall pay such cost in excess of such proceeds, award or other payment before being entitled to reimbursement out of such funds; (g) Borrower pays to Lender a non-refundable processing fee equal to the greater of $5,000.00 or .25% of the amount of such pro ceeds within sixty (60) days of the occurrence of any such damage or destruction and before Lender disburses any proceeds; and (h) such other conditions to such disbursements, in Lender's reasonable discretion, as would be customarily required by a construction lender doing business in the area where the Premises is located or which are otherwise required by any rating agency rating a securitization transaction with respect to the Loan.

(ii)

No payment made by Lender prior to the final completion of the repair or restoration work shall, together with all payments theretofore made, exceed 90% of the cost of such work performed to the time of payment, and at all times the undisbursed balance of said proceeds shall be at least sufficient to pay for the cost of

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completion of such work free and clear of all liens.  Any proceeds remaining after payment of the cost of rebuilding and restoration shall be paid to Borrower so long as no Event of Default has occurred and is continuing.

(iii)

Repair and restoration of the Premises shall be commenced promptly after the occurrence of the loss and shall be prosecuted to completion diligently, and the Premises shall be so restored and rebuilt to substantially the same character and quality as prior to such damage and destruction and shall comply with all Legal Requirements.

(d)

Should such damage or destruction occur after foreclosure or sale proceedings have been instituted, the proceeds of any such insurance policy or policies, if not applied in rebuilding or restoration of the Improvements, shall be used to pay (i) the Indebtedness then due and owing in the event of a non-judicial sale in such priority as Lender elects, or (ii) the amount due in accordance with any decree of foreclosure or deficiency judgment that may be entered in connection with such proceedings, and the balance, if any, shall be paid to the owner of the equity of redemption if it shall then be entitled to the same, or otherwise as any court having jurisdiction may direct.

7.

In the event of the commencement of a Taking affecting the Premises:

(a)

Borrower shall notify Lender thereof in the manner provided in this Deed of Trust for the giving of notices.  Lender may participate in such proceeding, and Borrower shall deliver to Lender all documents requested by it to permit such participation.

(b)

Borrower shall cause the proceeds of any award or other payment made relating to a Taking, to be paid directly to Lender.  Lender, in its sole and absolute discretion: (i) may apply all such proceeds to pay the Indebtedness in such priority as Lender elects, provided however, that if no Event of Default exists at the time of such application no Make Whole Premium shall be due; or (ii) subject to and in accordance with the provisions set forth in paragraph 6(c) above, may disburse such amounts of the proceeds as Lender reasonably deems necessary for the repair or replacement of the Premises.

Notwithstanding anything herein above to the contrary, provided no Event of Default exists, Lender agrees to disburse the proceeds received from any Inconsequential Taking, as hereinafter defined, to Borrower for the repair and/or

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replacement of the Premises.  An Inconsequential Taking shall be a Taking which (i) results in less than $100,000 in proceeds; (ii) does not, in Lender's determination, materially or adversely affect the Improvements, parking, access, ingress, egress or use of the Premises; and (iii) does not trigger any rights or options of tenants under the Leases.   

8.

If by the laws of the United States of America or of any state or governmental subdivision having jurisdiction over Borrower or of the Premises or of the Loan evidenced by the Loan Documents or any amendments or modifications thereof, any tax or fee is due or becomes due or is imposed upon Lender in respect of the issuance of the Note hereby secured or the making, recording and registration of this Deed of Trust or otherwise in connection with the Loan Documents, the Environmental Indemnity or the Loan, except for Lender's income or franchise tax, Borrower covenants and agrees to pay such tax or fee in the manner required by such law, and to hold harmless and indemnify Trustee and Lender, their successors and assigns, against any liability incurred by reason of the imposition of any such tax or fee.  

9.

(a)

Upon the occurrence of any Event of Default, Lender may, but need not, make any payment or perform any act herein required of Borrower, in any form and manner deemed expedient and may, but need not, make full or partial payments of principal or interest on prior encumbrances, if any, and purchase, discharge, compromise or settle any tax lien or other prior lien or title or claim thereof, or redeem from any tax sale or forfeiture affecting said Premises, or contest any tax or assessment.  All moneys paid for any of the purposes herein authorized and all reasonable expenses paid or incurred in connection therewith, including but not limited to, reasonable attorneys' fees and costs and reasonable attorneys' fees and costs on appeal, and any other money advanced by Lender to protect the Premises and the lien hereof, shall be so much additional Indebtedness secured hereby and shall become immediately due and payable without notice an d with interest thereon at the Default Rate from the date of expenditure or advance until paid.  

(b)

In making any payment hereby authorized relating to taxes or assessments or for the purchase, discharge, compromise or settlement of any prior lien, Lender may make such payment according to any bill, statement or estimate secured from the appropriate public office without inquiry into the accuracy thereof or into the validity of any tax, assessment, sale, forfeiture, tax lien or title or claim thereof or without inquiry as to the validity or amount of any claim for lien which may be asserted.  

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10.

If one or more of the following events (herein called an "Event of Default" or "Events of Default" as the context so requires) shall have occurred:  

(a)

failure to pay when due any principal, interest, Make Whole Premium or other Indebtedness, utilities, taxes or assessments or insurance premiums required pursuant to the Loan Documents or the Environmental Indemnity, and such failure shall have continued for 5 days; or

(b)

Borrower, Interest Owner or any guarantor voluntarily brings or acquiesces to any of the following:  (A) any action for dissolution, act of dissolution or dissolution or the like of Borrower, Interest Owner or any guarantor under the Federal Bankruptcy Code as now or hereafter constituted; (B) the filing of a petition or answer proposing the adjudication of Borrower, Interest Owner or any guarantor as a bankrupt or its reorganization or arrangement, or any composition, readjustment, liquidation, dissolution or similar relief with respect to it pursuant to any present or future federal or state bankruptcy or similar law; or (C) the appointment by order of a court of competent jurisdiction of a receiver, trustee or liquidator of the Premises or any part thereof or of Borrower, Interest Owner or any guarantor or of substantially all of the assets of Borrower, Interest Owner or any guarantor; or

(c)

one or more of the items set forth in paragraph 10(b) above occur which were either not (i) voluntarily brought by Borrower, Interest Owner or any guarantor or (ii) acquiesced in by Borrower, Interest Owner or any guarantor, and which are not discharged or dismissed within 90 days after the action, filing or appointment, as the case may be; or

With respect to the matters in (b) and (c) above for an Interest Owner only, no Event of Default shall occur until an interested party or Interest Owner asserts a claim or right against Borrower or the Premises which delays or otherwise affects Lender's rights, remedies, or interests granted under the Loan Documents (whether or not such assertion is successful).

(d)

with respect to the matters not described in the other subparagraphs of this paragraph 10, failure to duly observe or perform any covenant, condition or agreement of the Borrower or any guarantor contained in this Deed of Trust, the Guaranty, the Note or the Assignment of Leases from Borrower to Lender or in any other instrument or agreement which evidences or secures the Loan (the "Loan Documents"), but excluding the Environmental Indemnity or in the Environmental Indemnity, and such failure shall have continued for 30 days after Notice specifying such failure is given by Lender to Borrower; or

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If any failure to observe or perform under (d) above shall be of such nature that it cannot be cured or remedied within 30 days, Borrower shall be entitled to a reasonable period of time to cure or remedy such failure (not to exceed 90 days following the giving of Notice), provided Borrower commences the cure or remedy thereof within the 30 day period following the giving of Notice and thereafter proceeds with diligence, as determined by Lender, to complete such cure or remedy.  

With respect to the matters in (d), no Event of Default shall occur if the failure to observe or perform will not have a Material Adverse Effect as such term is defined below.

"Material Adverse Effect" means a material adverse effect upon (i) the business or the financial position or results of operation of Borrower, (ii) the ability of Borrower to perform, or of Lender to enforce, any of the Loan Documents or Environmental Indemnity or (iii) the value of (x) the Collateral taken as a whole or (y) the Premises.

(e)

the failure of Borrower to duly observe or perform any of the covenants, conditions and agreements of the Borrower contained in paragraph 2(f) of this Deed of Trust and to cure such failure within ten (10) days following Borrower’s receipt of Notice of such failure; provided, however, that Borrower shall only be granted said 10 day cure period if the failure to observe or perform is a curable event and the granting of said cure period will not have a Material Adverse Effect; or

(f)

any representation when made by or on behalf of Borrower, Interest Owner or any guarantor regarding the Premises, the making or delivery of any of the Loan Documents or the Environmental Indemnity or in any material written information provided by or on behalf of Borrower, Interest Owner or any guarantor in connection with the Loan shall prove to be untrue or inaccurate in any material respect; or

(g)

the failure of Borrower to give Notice to Lender within 90 days after the death of any individual who is personally liable for any obligation under the Loan Documents or the Environmental Indemnity, as Borrower, indemnitor or guarantor, whether or not such individual had executed the Note or this Deed of Trust; or

(h)

subject to the provisions of paragraph 2(f), the failure of Borrower to provide Lender with an assumption agreement in form and substance and executed by a person(s) or entity(ies) acceptable to Lender in its sole

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discretion to assume the obligations of any deceased individual who is personally liable for any obligation under the Loan Documents or the Environmental Indemnity, as Borrower, indemnitor or guarantor, whether or not such individual had executed the Note or this Deed of Trust, and such failure shall have continued for 90 days after the death of such individual;

(i)

all or any portion of the Premises is operated as or converted to a cooperative or condominium form of ownership; or

then, in each and every such case, the whole of said principal sum hereby secured shall, at the option of the Lender and without further notice to Borrower, become immediately due and payable together with accrued interest thereon, a Make Whole Premium calculated in accordance with the provisions of the Loan Documents and all other Indebtedness, and whether or not Lender has exercised said option, interest shall accrue on the entire principal balance and any interest or Make Whole Premium or other Indebtedness then due, at the Default Rate until fully paid or if Lender has not exercised said option, for the duration of any Event of Default.  

11.

Borrower agrees that if Lender accelerates the whole or any part of the principal sum hereby secured after the occurrence of an Event of Default but outside of the Open Periods, that Borrower shall pay as yield maintenance protection and not as a penalty, a "Make Whole Premium", as defined in the Note.

12.

(a)

Upon the occurrence of any Event of Default, in addition to any other rights or remedies provided in the Loan Documents, at law, in equity or otherwise, Lender shall have the right to cause the Premises or any part thereof to be sold in order to accomplish the object of these trusts and upon demand by Lender, Trustee, without demand on Borrower, shall sell the Premises or such part thereof as Trustee in its sole discretion may deem necessary to accomplish the objects of these trusts having first given notice of the time and place of such sale as required by law for the sale of real property upon execution.

(b)

Trustee may postpone such sale from time to time by giving notice of such postponement in the same manner in which any original notice of sale was given or by an announcement or proclamation made to the persons assembled at the time and place previously appointed and noticed for such sale or postponed sale, and on the date of such sale or the date to which such sale may have been postponed Trustee may sell the Premises to the highest bidder.  Lender or its agents may bid and purchase at such sale.  

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Trustee in conducting said sale may act either in person or through the agency of an auctioneer and may establish as one of the conditions of such sale that all bids and payments for said Premises be made in cash.

13.

Upon such sale, Trustee shall make, execute, and after due payment is made, deliver to the purchaser or purchasers a deed or deeds for the Premises or part thereof sold and shall apply the proceeds of the sale, at the election of Lender first, to all of the expenses of such sale including the reasonable expenses of this trust or the Trustee and the fees and costs of any attorneys for this trust, environmental audits, the Trustee or Lender, all of which shall accrue and become due from and after any Event of Default, together with any sums which Trustee or Lender shall have paid for procuring any abstract, certificate or report of title to the Premises and, second, to principal, interest and any other Indebtedness and all other sums or amounts due under the Note or agreed or provided to be paid by Borrower herein or in any other Loan Documents, all in such order as Lender may determine.  The remainder of such proceeds, if any, sha ll be paid to Borrower or Borrower's successors or assigns, as their rights may appear.  

14.

In the event of such a sale of the Premises or any part thereof and the execution of a deed or deeds therefor under these trusts, any recital therein of the occurrence of an Event of Default or of the giving or recording of any notice or demand by Trustee or Lender regarding such sale shall be conclusive proof thereof, and the receipt of the purchase money recited therein shall fully discharge the purchaser from any obligation for the proper application of the proceeds of sale in accordance with these trusts.

15.

Following the occurrence of an Event of Default, unless the same has been specifically waived in writing, Borrower shall forthwith upon demand of Trustee or Lender surrender to Lender possession of the Premises, and Lender shall be entitled to take actual possession of the Premises or any part thereof personally or by its agents or attorneys, and Lender in its discretion may, with or without force and with or without process of law, enter upon and take and maintain possession of all or any part of the Premises together with all documents, books, records, papers and accounts of the Borrower or the then owner of the Premises relating thereto, and may exclude Borrower, its agents or assigns wholly therefrom, and may as attorney-in-fact or agent of the Borrower, or in its own name as Lender and under the powers herein granted:

(a)

hold, operate, maintain, repair, rebuild, replace, alter, improve, manage or control the Premises as it deems judicious, insure and reinsure the same and any risks related to Lender's possession, operation and management thereof and receive all Rents, either personally or by its agents, and with full power to use such measures, legal or equitable, as in its discretion it

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deems proper or necessary to enforce the payment or security of the Rents, including actions for the recovery of Rent, actions in forcible detainer and actions in distress for Rents, hereby granting full power and authority to exercise each and every of the rights, privileges and powers herein granted at any and all times hereafter, without notice to Borrower; and

(b)

conduct leasing activity pursuant to the provisions of the Assignment of Leases.

Neither Trustee nor Lender shall be obligated to perform or discharge, nor does either hereby undertake to perform or discharge, any obligation, duty or liability under any Lease.  Except to the extent that the same is caused solely by Lender's gross negligence or willful misconduct, should Trustee or Lender incur any liability, loss or damage under any Leases, or under or by reason of the Assignment of Leases, or in the defense of any claims or demands whatsoever which may be asserted against Lender or Trustee by reason of any alleged obligations or undertakings on its part to perform or discharge any of the terms, covenants or agreements in any Lease, the amount thereof, including costs, expenses and reasonable attorneys' fees and costs, including reasonable attorneys' fees and costs on appeal, shall be added to the Indebtedness and secured hereby.

16.

Upon the occurrence of an Event of Default, Trustee and Lender in the exercise of the rights and powers conferred upon them shall have the full power to use and apply the Rents, less costs and expenses of collection to the payment of or on account of the items listed in (a) - (c) below, at the election of Lender and in such order as Lender may determine as follows:

(a)

to the payment of (i) the expenses of operating and maintaining the Premises, including, but not limited to the cost of management, leasing (which shall include reasonable compensation to Trustee, Lender and their respective agent or agents if management and/or leasing is delegated to an agent or agents), repairing, rebuilding, replacing, altering and improving the Premises, (ii) premiums on insurance as hereinabove authorized, (iii) taxes and special assessments now due or which may hereafter become due on the Premises, and (iv) expenses of placing the Premises in such condition as will, in the sole judgment of Lender, make it readily rentable;

(b)

to the payment of any principal, interest or any other Indebtedness secured hereby or any deficiency which may result from any foreclosure sale;

(c)

to the payment of established claims for damages, if any, reasonable attorneys' fees and costs and reasonable attorneys' fees and costs on appeal.

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The manner of the application of Rents, the reasonableness of the costs and charges to which such Rents are applied and the item or items which shall be credited thereby shall be within the sole and unlimited discretion of Lender.  To the extent that the costs and expenses in (a) and (c) above exceed the amounts collected, the excess shall be added to the Indebtedness and secured hereby.

17.

Upon the occurrence of any Event of Default, unless the same has been specifically waived in writing, Lender may apply to any court having jurisdiction for the appointment of a receiver of the Premises.  Such appointment may be made either before or after sale, without notice, without regard to the solvency or insolvency of Borrower at the time of application for such receiver and without regard to the then value of the Premises or the adequacy of Lender's security.  Lender may be appointed as such receiver.  The receiver shall have power to collect the Rents during the pendency of any foreclosure proceedings and, in case of a sale, during the full statutory period of redemption, if any, as well as during any further times when Borrower, except for the intervention of such receiver, would be entitled to collect such Rents.  In addition, the receiver shall have all other powers which shall be necessary or are usual in such cases for the protection, possession, control, management and operation of the Premises during the whole of said period.  The court from time to time may authorize the receiver to apply the net income in its possession at Lender's election and in such order as Lender may determine in payment in full or in part of those items listed in paragraph 16.

18.

(a)

Borrower agrees that all reasonable costs, charges and expenses, including but not limited to, reasonable attorneys' fees and costs, incurred or expended by Trustee or Lender arising out of or in connection with any action, proceeding or hearing, legal, equitable or quasi-legal, including the preparation therefor and any appeal therefrom, in any way affecting or pertaining to the Loan Documents, the Environmental Indemnity, or the Premises, shall be promptly paid by Borrower.  All such sums not promptly paid by Borrower shall bear interest at the Default Rate from the date of such advance and shall be due and payable on demand and, except for sums relating to the Environmental Indemnity, shall be added to the Indebtedness secured hereby.

(b)

Borrower hereby agrees that upon the occurrence of an Event of Default and the acceleration of the principal sum secured hereby pursuant to this Deed of Trust, to the full extent that such rights can be lawfully waived, Borrower hereby waives and agrees not to insist upon, plead, or in any manner take advantage of, any notice of acceleration, any stay, extension, exemption, homestead, marshaling or moratorium law or any law providing for the valuation or appraisement of all or any part of the

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Premises prior to any sale or sales thereof under any provision of this Deed of Trust or before or after any decree, judgment or order of any court or confirmation thereof, or claim or exercise any right to redeem all or any part of the Premises so sold and hereby expressly waives to the full extent permitted by applicable law on behalf of itself and each and every person or entity acquiring any right, title or interest in or to all or any part of the Premises, all benefit and advantage of any such laws which would otherwise be available to Borrower or any such person or entity, and agrees that neither Borrower nor any such person or entity will invoke or utilize any such law to otherwise hinder, delay or impede the exercise of any remedy granted or delegated to Lender herein but will permit the exercise of such remedy as though any such laws had not been enacted.  Borrower hereby further expressly waives to the full extent perm itted by applicable law on behalf of itself and each and every person or entity acquiring any right, title or interest in or to all or any part of the Premises any and all rights of redemption from any sale or any order or decree of foreclosure obtained pursuant to provisions of this Deed of Trust.

19.

In accordance with and subject to the terms and conditions of the Assignment of Leases, Borrower hereby assigns to Lender directly and absolutely, and not merely collaterally, the interest of Borrower as lessor under the Leases of the Premises, and the Rents payable under any Lease and/or with respect to the use of the Premises, or portion thereof, including any oil, gas or mineral lease, or any installments of money payable pursuant to any agreement or any sale of the Premises or any part thereof, subject only to a license, if any, granted by Lender to Borrower with respect thereto prior to the occurrence of an Event of Default.  Borrower has executed and delivered the Assignment of Leases which grants to Lender specific rights and remedies in respect of said Leases and governs the collection of Rents thereunder and from the use of the Premises, and such rights and remedies so granted shall be cumulative of those granted herein.  

The collection of such Rents and the application thereof as aforesaid shall not cure or waive any Event of Default or notice of default hereunder or invalidate any act done pursuant to such notice, except to the extent any such Event of Default is fully cured.  Failure or discontinuance of Lender at any time, or from time to time, to collect any such moneys shall not impair in any manner the subsequent enforcement by Lender of the right, power and authority herein conferred on Lender.  Nothing contained herein, including the exercise of any right, power or authority herein granted to Lender, shall be, or be construed to be, an affirmation by Lender of any tenancy, Lease or option, or right to possession otherwise, or an assumption of liability under, or the subordination of the lien or charge of this Deed of Trust to any such tenancy, Lease or option or right to possession otherwise.  Borrower hereby agrees that, in the event Lender exercises its rights as

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provided for in this paragraph or in the Assignment of Leases, Borrower waives any right to compensation for the use of Borrower's furniture, furnishings or equipment in the Premises for the period such assignment of rents or receivership is in effect, it being understood that the Rents derived from the use of any such items shall be applied to Borrower's obligations hereunder as above provided.  

20.

All rights and remedies granted to Trustee or Lender in the Loan Documents shall be in addition to and not in limitation of any rights and remedies to which it is entitled in equity, at law or by statute, and the invalidity of any right or remedy herein provided by reason of its conflict with applicable law or statute shall not affect any other valid right or remedy afforded to Trustee or Lender.  No waiver of any default or Event of Default under any of the Loan Documents shall at any time thereafter be held to be a waiver of any rights of the Trustee or Lender hereunder, nor shall any waiver of a prior Event of Default or default operate to waive any subsequent Event of Default or default.  All remedies provided for in the Loan Documents are cumulative and may, at the election of Lender, be exercised alternatively, successively or concurrently.  No act of Trustee or Lender shall be construed as an election to proceed under any one provision herein to the exclusion of any other provision or to proceed against one portion of the Premises to the exclusion of any other portion.  Time is of the essence under this Deed of Trust and the Loan Documents.

21.

By accepting payment of any sum secured hereby after its due date, Lender does not waive its right either to require prompt payment when due of all other sums or installments so secured or to declare a default for failure to pay such other sums or installments.

22.

The usury provisions of paragraph 6 of the Note and the liability provisions of paragraph 9 of the Note are fully incorporated herein by reference as if the same were specifically stated here.

23.

In the event one or more provisions of the Loan Documents shall be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision hereof, and the Loan Documents shall be construed as if any such provision had never been contained herein.  

24.

If the payment of the Indebtedness secured hereby or of any part thereof shall be extended or varied, or if any part of the security be released, all persons now or at any time hereafter liable therefor, or interested in said Premises, shall be held to assent to such extension, variation or release, and their liability and the lien and all provisions hereof shall continue in full force, the right of recourse against all such

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persons being expressly reserved by Lender notwithstanding such variation or release.  

25.

Upon payment in full of the principal sum, interest and other Indebtedness secured by the Loan Documents, these presents shall be null and void, and Trustee shall release this Deed of Trust and the lien hereof by proper instrument executed in recordable form.  

26.

(a)

Borrower hereby grants to Lender and its respective agents, attorneys, employees, consultants, contractors and assigns an irrevocable license and authorization to enter upon and inspect the Premises and all facilities located thereon at reasonable times.

(b)

In connection with any sale or conveyance of this Deed of Trust, Borrower grants to Lender and its respective agents, attorneys, employees, consultants, contractors and assigns an irrevocable license and authorization to conduct, at Lender's expense, a Phase I environmental audit of the Premises.

(c)

In the event there has been an Event of Default or in the event Lender has formed a reasonable belief, based on its inspection of the Premises or other factors known to it, that Hazardous Materials may be present on the Premises, then Borrower grants to Lender and its respective agents, attorneys, employees, consultants, contractors and assigns an irrevocable license and authorization to conduct environmental tests of the Premises, including without limitation, a Phase I environmental audit, subsurface testing, soil and ground water testing, and other tests which may physically invade the Premises or facilities (the "Tests").  The scope of the Tests shall be such as Lender, in its sole but reasonable discretion, determines is necessary to (i) investigate the condition of the Premises, (ii) protect the security interests created under this Deed of Trust, or (iii) determine compliance with Environmental Laws, the provisions of the Loan Documents and the Environmental Indemnity and other matters relating thereto.  Borrower shall pay the reasonable costs of the Tests and upon Borrower’s request, Lender will make available to Borrower the result of the Tests.

(d)

Provided no Event of Default has occurred, Lender will provide Borrower with reasonable notice of Lender's intent to enter, inspect and conduct the Tests provided for in this paragraph.  In addition, Lender shall conduct such inspections and Tests during normal business hours and use reasonable efforts to minimize disruption of lessees' business operations.

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The foregoing licenses and authorizations are intended to be a means of protection of Lender's security interest in the Premises and not as participation in the management of the Premises.

27.

Within 15 days after any written request by any party to this Deed of Trust, the requested party shall certify, by a written statement duly acknowledged, the amount of principal, interest and other Indebtedness then owing on the Note, the terms of payment, Maturity Date and the date to which interest has been paid.  Borrower shall further certify whether any defaults, offsets or defenses exist against the Indebtedness secured hereby.  

28.

(a)

Borrower shall furnish to Lender within 120 days after the end of each fiscal year of Borrower, a statement of income and expenses for Borrower’s operation of the Premises for that fiscal year, a statement of changes in financial position of Borrower relating to the Premises for that fiscal year and, when requested by Lender, a balance sheet showing all assets and liabilities of Borrower relating to the Premises as of the end of that fiscal year;

(b)

Borrower shall furnish to Lender within 120 days after the end of each fiscal year of Borrower, and at any other time upon Lender’s request, a rent schedule for the Premises showing the name of each tenant, and for each tenant, the space occupied, the lease expiration date, the rent payable for the current month, the date through which rent has been paid, and any related information requested by Lender;

(c)

Borrower shall furnish to Lender within 120 days after the end of each fiscal year of Borrower, and at any other time upon Lender’s request, an accounting of all security deposits held pursuant to all Leases, including the name of the institution (if any) and the names and identification numbers of the accounts (if any) in which such security deposits are held and the name of the person to contact at such financial institution, along with any authority or release necessary for Lender to access information regarding such accounts;

(d)

upon Lender’s request, a balance sheet, a statement of income and expenses for Borrower, a statement of changes in financial position of Borrower for Borrower’s most recent fiscal year, an aged account receivables report and an annual budget; and

(e)

if required by Lender, a statement of income and expense for the Premises for the prior month or quarter.

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(f)

Each of the statements, schedules and reports required by Section 28 shall be certified to be complete and accurate by an individual having authority to bind Borrower, and shall be in such form and contain such detail as Lender may reasonably required.  If an Event of Default has occurred and is continuing, Lender may require that the financial statements required by Sections 28(a), 28(b) and 28(c) be audited, but may not require that any other financial statements required by Section 28 be audited.  Certification of a statement by the chief financial officer of the entity that is the subject of the statement or, in the case of a partnership, the chief financial officer of the general partner, will be acceptable to Lender as certification by an individual having authority to bind Borrower.

29.

Each notice, consent, request, report or other communication under this Deed of Trust or any other Loan Document (each a "Notice") which any party hereto may desire or be required to give to the other shall be deemed to be an adequate and sufficient notice if given in writing and service is made by either (i) registered or certified mail, postage prepaid, in which case notice shall be deemed to have been received three (3) business days following deposit to U.S. mail; or (ii) nationally recognized overnight air courier, next day delivery, prepaid, in which case such notice shall be deemed to have been received one (1) business day following delivery to such nationally recognized overnight air courier.  All Notices shall be addressed to Borrower at its address given on the first page hereof, or to Lender at c/o Principal Real Estate Investors, LLC, 801 Grand Avenue, Des Moines, Iowa 50392-1450, Attn:  Commerc ial Real Estate Servicing, Loan No. 755502, or to such other place as any party may by written notice to the other parties hereafter designate as a place for service of notice.  Borrower shall not be permitted to designate more than one place for service of Notice concurrently.

30.

Lender, from time to time, may substitute another Trustee in place of the Trustee named herein, to execute the trusts hereby created; and upon such appointment, and without conveyance to the successor trustee, the successor trustee shall be vested with all the title, interest, powers, duties and trusts in the Premises hereby vested in or conferred upon Trustee herein named.  Each such appointment and substitution shall be made by written instrument executed by the Lender containing reference to this Deed of Trust sufficient to identify it, which instrument, when recorded in the office of the County Recorder of the county or counties in which the Premises is situated, shall be conclusive proof of proper appointment of the successor trustee.  The recital or statement, in any instrument executed by Trustee in pursuance of any of said trusts, of the due authorization of any agent of the Trustee executing the same shall for all p urposes be conclusive proof of such authorization.  

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31.

Trustee at any time, at Trustee's option, may commence and maintain suit in any court of competent jurisdiction and obtain the aid and direction of said court in the execution by it of the trusts or any of them, herein expressed or contained, and, in such suit, may obtain the orders or decrees, interlocutory or final of said court directing the execution of said trusts, and confirming and approving Trustee's acts, or any of them, or any sales or conveyances made by Trustee, and adjudging the validity thereof, and directing that the purchasers of the property sold and conveyed be let into immediate possession thereof, and providing for orders of court or other process requiring the Sheriff of the county in which said property is situated to place and maintain said purchasers in quiet and peaceable possession of the property so purchased by them, and the whole thereof.  

32.

Borrower has had the opportunity to fully negotiate the terms hereof and modify the draftsmanship of the Loan Documents and the Environmental Indemnity.  Therefore, the terms of the Loan Documents and the Environmental Indemnity shall be construed and interpreted without any presumption, inference, or rule requiring construction or interpretation of any provision of the Loan Documents and the Environmental Indemnity against the interest of the party causing the Loan Documents and the Environmental Indemnity or any portion of it to be drafted.  Borrower is entering into the Loan Documents and the Environmental Indemnity freely and voluntarily without any duress, economic or otherwise.

33.

Borrower, forthwith upon request, at any and all times hereafter, at the expense of Borrower, will cause to be made, executed, acknowledged and delivered to Trustee, any and every deed or assurance in law which Trustee or counsel of Trustee shall reasonably advise or require for the more sure, effectual and satisfactory granting and confirming of said Premises unto Trustee.  

34.

Trustee shall not be liable or responsible for its acts or omissions hereunder, except for Trustee's own gross negligence or willful default, or be liable or responsible for any acts or omissions of any agent, attorneys or employee by him employed hereunder, if selected with reasonable care.  

35.

Trustee accepts this trust when this Deed of Trust executed and acknowledged is made a public record as provided by law.  Trustee is not obligated to notify any party hereto of pending sale under any other deed of trust or of any action or proceeding in which Borrower, Lender, or Trustee shall be a party unless brought by Trustee.  

36.

This Deed of Trust and all provisions hereof shall inure to the benefit of the heirs, successors and assigns of Lender and shall bind the heirs and permitted successors and assigns of Borrower.  

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37.

This Deed of Trust shall be governed by, and construed in accordance with, the laws of the state of California, without regard to its conflicts of law principles.

38.

As used herein, the term "Default Rate" means a rate equal to the lesser of (i) four percent (4%) per annum above the then applicable interest rate payable under the Note or (ii) the maximum rate allowed by applicable law.

39.

BORROWER AND LENDER EACH KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE, TO THE EXTENT PERMITTED BY LAW, TRIAL BY JURY IN ANY ACTIONS BROUGHT BY BORROWER, TRUSTEE OR LENDER IN CONNECTION WITH THIS DEED OF TRUST, ANY OF THE LOAN DOCUMENTS, THE INDEBTEDNESS SECURED HEREBY, OR ANY OTHER STATEMENTS OR ACTIONS OF LENDER.

40.

This Deed of Trust and the Indebtedness secured hereby is for the sole purpose of conducting or acquiring a lawful business, professional or commercial activity or for the acquisition or management of real or personal property as a commercial investment, and all proceeds of such Indebtedness shall be used for said business or commercial investment purpose.  Such proceeds will not be used for the purchase of any security within the meaning of the Securities Exchange Act of 1934, as amended, or any regulation issued pursuant thereto, including without limitation, Regulations U, T and X of the Board of Governors of the Federal Reserve System.  This is not a purchase money deed of trust where a seller is providing financing to a buyer for the payment of all or any portion of the purchase price, and the Premises secured hereby is not a residence or homestead or used for mining, grazing, agricultural, timber or farming purposes.

41.

Unless Lender shall otherwise direct in writing, Borrower shall appear in and defend all actions or proceedings purporting to affect the security hereunder, or any right or power of the Lender.  The Lender shall have the right to appear in such actions or proceedings.  Borrower shall save Lender harmless from all reasonable costs and expenses, including but not limited to, reasonable attorneys' fees and costs, and costs of a title search, continuation of abstract and preparation of survey incurred by reason of any action, suit, proceeding, hearing, motion or application before any court or administrative body in and to which Lender may be or become a party by reason hereof.  Such proceedings shall include but not be limited to condemnation, bankruptcy, probate and administration proceedings, as well as any other action, suit, proceeding, right, motion or application wherein proof of claim is by law required to be filed or in which it becomes necessary to defend or uphold the terms of this Deed of Trust or the Loan Documents or otherwise purporting to affect the security hereof or the rights or powers of Lender.  All money paid or expended by Lender in that regard, together with interest thereon from date of such payment at the applicable interest rate shall be

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additional Indebtedness secured hereby and shall be immediately due and payable by Borrower without notice.

42.

Upon the occurrence of an Event of Default, unless the same has been specifically waived in writing, all Rents collected or received by Borrower shall be accepted and held for Lender in trust and shall not be commingled with the funds and property of Borrower, but shall be promptly paid over to Lender.

43.

If more than one, all obligations and agreements of Borrower are joint and several.

44.

This Deed of Trust may be executed in counterparts, each of which shall be deemed an original; and such counterparts when taken together shall constitute but one agreement.

45.

Borrower shall pay Lender for every Lender statement furnished at Borrower's request the maximum fee allowed by law pursuant to Section 2943 of the Civil Code of California and all amendments thereto, the provisions of which are incorporated herein by reference and made a part hereof.  Such fee shall be computed as of the time said statement is furnished.

46.

Borrower hereby irrevocably authorizes Lender to apply any and all amounts received by Lender in repayment of amounts due under the Loan Documents first to amounts which are not guaranteed pursuant to the terms of any guaranty and then to amounts which are guaranteed pursuant to the terms of any guaranty.  Borrower hereby waives any and all rights it has or may have under Section 2822 of the California Civil Code which provides that if a guarantor is "liable upon only a portion of an obligation and the principal provides partial satisfaction of the obligation, the principal may designate the portion of the obligation that is to be satisfied."

47.

Notwithstanding anything to the contrary set forth herein or in any of the Loan Documents, this Deed of Trust shall not secure the following obligations (the "Unsecured Obligations"):  (i) any obligations evidenced by or arising under the Environmental Indemnity; and (ii) any other obligations in this Deed of Trust or in any of the other Loan Documents to the extent that such other obligations relate specifically to the presence on the Premises of Hazardous Materials and are the same or have the same effect as any of the obligations evidenced by or arising under the Environmental Indemnity (excluding the cost of any Tests incurred by Lender hereunder).  Any breach or default with respect to the Unsecured Obligations after the expiration of any applicable cure periods shall constitute an Event of Default hereunder, notwithstanding the fact that such Unsecured Obligations are not secured by this Deed of Trust.

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48.

Borrower desires and intends that this Deed of Trust also constitute a fixture filing between Borrower as debtor and Lender as secured party, as defined in the Uniform Commercial Code.  To this end, Borrower acknowledges that (i) this Deed of Trust covers goods which are or are to become fixtures on the Land; (ii) this financing statement is to be recorded; (iii) Borrower is the record owner of such property; and (iv) products of collateral are also covered.  No financing statement in favor of any secured party other than Lender covering the personal property described herein or any portion thereof is on file in any public office.

(Signatures on next page)

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IN WITNESS WHEREOF, Borrower has caused this Deed of Trust to be duly executed and delivered as of the date first above written.   

VMS NATIONAL PROPERTIES, an Illinois general partnership

By:

VMS NATIONAL RESIDENTIAL PORTFOLIO I, an Illinois limited partnership

By:

MAERIL, INC., a Delaware

                        corporation, its general partner

       By: /s/Patti K. Fielding

       Name:  Patti K. Fielding

                Title:  Executive Vice President  

                           and Treasurer

By:

VMS NATIONAL RESIDENTIAL PORTFOLIO II, an Illinois limited partnership

By:

MAERIL, INC., a Delaware

                        corporation, its general partner

       By: /s/Patti K. Fielding

       Name:  Patti K. Fielding

                Title:  Executive Vice President  

                           and Treasurer

EX-10

EXHIBIT 10.25

GUARANTY

755502

THIS GUARANTY (as the same may from time to time hereafter be modified, supplemented or amended, the "Guaranty") is made as of January 19, 2007, by AIMCO PROPERTIES, L.P., a Delaware limited partnership, having an office at Stanford Place 3, 4582 South Ulster Street Parkway, Suite 1100, Denver, Colorado 80237 ("Guarantor"), in favor of PRINCIPAL LIFE INSURANCE COMPANY, an Iowa corporation ("Lender").

RECITALS:

Lender has agreed to make a loan (the "Loan") in the original principal sum of Thirteen Million and 00/100 Dollars ($13,000,000.00) (the "Loan Amount") to VMS NATIONAL PROPERTIES, an Illinois general partnership ("Borrower"); and

The Loan is evidenced by Borrower's secured promissory note made payable and delivered to Lender (as the same may from time to time hereafter be modified, amended, supplemented, extended or consolidated in writing, and any note(s) issued in exchange therefor or replacement thereof, the "Note") and further evidenced and secured by a "Mortgage" (it being agreed that "Mortgage" as hereinafter used shall be construed to mean "mortgage" or "deed of trust" or "trust deed" or "deed to secure debt" as the context so requires) on certain real estate located in Sacramento County, California, together with all existing improvements constructed thereon, said Premises being more particularly described in said Mortgage, and an Assignment of Leases ("Assignment of Leases"); and

In connection with the Loan, the Borrower has also executed that certain Environmental Indemnity ("Environmental Indemnity") for the benefit of Lender (the Note, Environmental Indemnity, Mortgage and Assignment of Leases and all other instruments or agreements by which the Loan is evidenced or secured are hereinafter collectively referred to as the "Underlying Instruments"); and

It is a condition of Lender's agreement to make the Loan that Guarantor be unconditionally liable for and personally guarantee the payment and performance of certain liabilities and obligations of the Borrower under the Underlying Instruments upon the terms and conditions as are hereinafter set forth and except for such liabilities and obligations described herein, Guarantor shall have no liability in connection with, or responsibility to perform, under or in accordance with the Underlying Instruments; and

WHEREAS, Guarantor is financially interested in Borrower and is materially benefited by the consummation of the Loan and has agreed to unconditionally and personally guarantee the payment and performance of certain liabilities and obligations of Borrower under the Underlying Instruments upon the terms and conditions as are hereinafter set forth.

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NOW, THEREFORE, in order to induce Lender to make the Loan to Borrower, Guarantor intending to be legally bound, hereby makes the following representations and warranties to the Lender and hereby covenants and agrees with the Lender as follows:

1.

Guarantor absolutely, irrevocably and unconditionally guarantees to the Lender payment and the full, faithful and timely performance of any and all liabilities and obligations of Borrower whether now existing or hereafter incurred under the Environmental Indemnity and paragraph 9 of the Note (all of which payments, liabilities and obligations are hereinafter collectively referred to as the "Guaranteed Obligations").

2.

Guarantor absolutely, irrevocably and unconditionally waives notice of acceptance of this Guaranty and notice of any payment, liability or obligation to which it may apply, and waives presentment, demand of payment, protest, notice of dishonor or nonpayment of such liabilities under this Guaranty or any of the Underlying Instruments creating the Guaranteed Obligations and any suit or taking other action by the Lender against, and any other notice to, any party liable thereon or any property which may be security therefor.

3.

The Lender may at any time and from time to time without the consent of, or notice to, Guarantor, without incurring any responsibility to Guarantor and without impairing or releasing any of the obligations of Guarantor hereunder, upon or without any terms or conditions and in whole or in part:

(a)

renew, alter or change the interest rate, manner, time, place or terms of payment or performance of any of the Guaranteed Obligations, or any liability incurred directly or indirectly in respect thereof, whereupon the guaranty herein made shall apply to the Guaranteed Obligations as so changed, extended, renewed or altered;

(b)

sell, exchange, release, surrender, and in any manner and in any order realize upon or otherwise deal with any property at any time directly and absolutely assigned or pledged or mortgaged to secure the Guaranteed Obligations or any liabilities (including any of those hereunder) incurred directly or indirectly in respect thereof;

(c)

exercise or refrain from exercising any rights against Borrower or any other person (including Guarantor) or otherwise act or refrain from acting with regard to the Underlying Instruments, Guaranteed Obligations or this Guaranty;

(d)

settle or compromise any of the Guaranteed Obligations, any security therefor or any liability (including any of those hereunder) incurred directly or indirectly in respect thereof or hereof, and/or subordinate the payment of all or any part thereof to the payment of any liability of Borrower (whether or not then due) to creditors of Borrower other than the Lender and Guarantor;

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(e)

apply any sums in whatever manner paid or realized to any liability or liabilities of Borrower to the Lender regardless of what liability or liabilities of Borrower remain unpaid;

(f)

consent to or waive any breach of or any act, omission or default under the Underlying Instruments or otherwise amend, modify or supplement any of such instruments or agreements; and/or

(g)

sell, convey or assign, whether into a securitized transaction or otherwise, all or any part of Lender's interest in this Guaranty and the Underlying Instruments.

4.

(a)

No invalidity, irregularity or unenforceability of all or any part of the Underlying Instruments, the Guaranteed Obligations or this Guaranty, or of any security therefor, shall affect, impair or constitute a defense to this Guaranty.  This Guaranty is a direct and primary obligation of Guarantor, and Guarantor's obligations hereunder are not as a surety.  This is a guaranty of payment and performance, and not merely a guaranty of collection.

(b)

Guarantor acknowledges and agrees that this Guaranty and Guarantor's obligations with respect to payments and performance under the Environmental Indemnity shall remain in full force and effect, notwithstanding the fact that the Note and payments due under the other Underlying Instruments have been paid in full.  The Guarantor’s obligations with respect to payments and performance under paragraph 9 of the Note shall remain in full force and effect until the liabilities and obligations of Borrower under paragraph 9 of the Note have been paid and performed in full.

5.

(a)

Notwithstanding any payment or payments made by Guarantor hereunder, Guarantor will not assert or exercise any right of the Lender or of such Guarantor against Borrower to recover the amount of any payment made by such Guarantor to the Lender by way of subrogation, reimbursement, contribution, indemnity or otherwise arising by contract or operation of law, and Guarantor shall not have any right of recourse to or any claim against assets or property of Borrower, whether or not the obligations of Borrower have been satisfied, all of such rights being herein expressly waived by Guarantor.  The provisions of this paragraph shall survive the termination of this Guaranty, and any satisfaction and discharge of Borrower by virtue of any payment, court order or any applicable law.

(b)

Notwithstanding the provisions of Section 5(a), Guarantor shall have and be entitled to all rights of subrogation otherwise provided by applicable law in respect of any payment Guarantor may make or be obligated to make under this Guaranty, and to assert and enforce the same, in each case on and after, but at no time prior to, the date (the "Subrogation Trigger Date") which is 91 days after the

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date on which all obligations under the Underlying Instruments shall have been paid or performed in full, if and only if the existence of Guarantor's rights under this Section 5(b) would not make Guarantor a creditor (as defined in the Bankruptcy Reform Act of 1978, an amended, 11 U.S.C. Sections 101 et seq., and the regulations adopted and promulgated pursuant thereto) of Borrower in any insolvency bankruptcy, reorganization or similar proceeding commenced on or prior to the Subrogation Trigger Date.

(c)

In the event that Guarantor shall advance or become obligated to pay any sums with respect to any obligation hereby guaranteed or in the event that for any reason whatsoever the Borrower or any subsequent owner of the collateral securing the Loan is now, or shall hereafter become, indebted to Guarantor, Guarantor agrees that the amount of such sums and of such Indebtedness together with all interest thereon, shall at all times be subordinate as to the lien, time of payment and in all other respects, to all sums, including principal, interest and other Indebtedness, at any time owing to the Lender under any of the Underlying Instruments.  Nothing herein contained is intended or shall be construed to give to Guarantor any right to participate in any way in the right, title or interest of the Lender in or to the collateral securing the Loan, notwithstanding any payments made by Guarantor under this Guaranty, all such rights of parti cipation being hereby expressly waived and released.

(d)

Guarantor waives all rights and defenses arising out of an election of remedies by the creditor, even though that election of remedies, such as a nonjudicial foreclosure with respect to security for a guaranteed obligation, has destroyed the guarantor's rights of subrogation and reimbursement against the principal by the operation of Section 580d of the Code of Civil Procedure or otherwise.

(e)

Guarantor waives any rights Guarantor might have pursuant to the terms of Sections of the California Civil Code or Code of Civil Procedure including without limitation the following: (i) Guarantor waives the benefit of any statute of limitations affecting Guarantor's liability hereunder or the enforcement thereof, including, without limitation all rights and benefits, if any, arising under Section 359.5 of the California Code of Civil Procedure; (ii) Guarantor hereby waives, to the fullest extent permitted by law, all rights and benefits under Section 2809 of the California Civil Code purporting to reduce a guarantor's obligations in proportion to the principal obligation, all rights and benefits under Section 580a of the California Code of Civil Procedure purporting to limit the amount of any deficiency judgment which might be recoverable following the occurrence of a trustee's sale under the Deed of Trust, all rights and benefits un der Section 580b of the California Code of Civil Procedure stating that no deficiency may be recovered on a real property purchase money obligation and all rights and benefits under Section 580d of the California Code of Civil Procedure stating that no

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deficiency may be recovered on a note secured by a deed of trust on real property in case such real property is sold under the power of sale contained in such deed of trust, to the extent any such sections have any application hereto or any application to Guarantor; (iii) Guarantor waives all rights and defenses that the Guarantor may have because the Borrower's debt is secured by real property.  This means, among other things:  (1) Lender may collect from the Guarantor without first foreclosing on any real or personal property collateral pledged by the Borrower, (2) if Lender forecloses on any real property collateral pledged by the Borrower:  (A) the amount of debt may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price, (B) Lender may collect from the Guarantor even if Lender, by foreclosing on the real property collateral, has destroyed any right the Guarantor may have to collect from Borrower.  This is an unconditional and irrevocable waiver of any rights and defenses the Guarantor may have because Borrower's debt is secured by real property.  These rights and defenses include, but are not limited to, any rights or defenses based upon Section 580a, 580b, 580d, or 726 of the Code of Civil Procedure; (iv) without limiting the generality of the foregoing or any other provision hereof, the Guarantor waives all rights and benefits which might otherwise be available to the Guarantor under Division Third, Part 4, Title XII of the California Civil Code.

6.

Guarantor agrees that to the extent that Borrower makes a payment or payments to Lender, which payment or payments or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required, for any of the foregoing reasons or for any other reasons, to be repaid or paid over to a custodian, trustee, receiver or any other party under any bankruptcy act, state or federal law, common law or equitable cause, then to the extent of such payment or repayment, the obligation or part thereof intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made.

7.

Guarantor makes the following representations and warranties which shall survive the execution and delivery of this Guaranty:

(a)

Guarantor is and, until the Indebtedness is paid in full, will continue to (i) be a duly organized and validly existing entity in good standing under the laws of the state of its formation, (ii) be duly qualified as a foreign entity in each jurisdiction in which the nature of its business makes such qualification necessary or desirable, (iii) have the requisite power and authority to carry on its business as now being conducted, (iv) have the requisite power to execute, deliver and perform its obligations under this Guaranty, and (v) comply with the provisions of all of its organizational documents, and the Legal Requirements of the state of its formation.

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(b)

The execution, delivery and performance of this Guaranty (i) are within the applicable powers of Guarantor; (ii) have been authorized by all requisite action; (iii) have received all necessary approvals and consents, corporate, governmental or otherwise; (iv) does not and will not violate, conflict with, result in a breach of or constitute (with notice or lapse of time, or both) a default under any provision of law, any order or judgment of any court or governmental authority, the articles of incorporation, by-laws, partnership, operating or trust agreement, or other governing instrument of Guarantor, or any indenture, agreement or other instrument to which Guarantor is a party or by which Guarantor or any of Guarantor's assets is or may be bound or affected; (v) does not and will not result in the creation or imposition of any lien, charge or encumbrance whatsoever upon any of Guarantor's assets; and (vi) does not and will not requir e any authorization or license from, or any filing with, any governmental authority or other body.

(c)

This Guaranty constitutes the legal, valid and binding obligations of Guarantor, enforceable against Guarantor in accordance with its terms, except as may be limited by (i) bankruptcy, insolvency, reorganization or other similar laws affecting the rights of creditors generally, and (ii) general principles of equity (regardless of whether considered in a proceeding in equity or at law).

8.

Guarantor and Borrower are separate and distinct entities with no identity of interest with respect to any Indebtedness which may become owed or any payments which may be made hereunder.  Borrower is not contractually bound to Guarantor with respect to any payments hereafter made under this Guaranty in any manner which would have the effect of imputing the liability of Guarantor hereunder to Borrower.

9.

Guarantor is related and/or affiliated with Borrower, has personal knowledge of and is familiar with Borrower's business affairs, books and records and has the ability to influence Borrower's financial decisions.  Guarantor represents that Borrower is in sound financial condition as of the date of this Guaranty.

10.

Nothing herein contained shall in any manner affect the lien or priority of the Mortgage, and upon the occurrence of an Event of a Default, the Lender may invoke any remedies it may have under the Underlying Instruments, or this Guaranty, either concurrently or successively and the exercise of any one or more of such remedies shall not be deemed an exhaustion of such remedy or remedies or a waiver of any other remedy or remedies and shall not be deemed an election of remedies.  Guarantor hereby specifically waives any defense to its performance under this Guaranty based upon an election of remedies by Lender, including but not limited to an election to foreclose by nonjudicial sale under any deed of trust or security agreement and pursue any other remedy which destroys, lessens or otherwise affects Guarantor's subrogation rights and/or its rights to reimbursement from or to proceed against Borrower or any other person, when resul ting from the judicial or nonjudicial foreclosure (under any deed of trust or security agreement) or the selling or

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otherwise disposing of or collecting or applying any property, real or personal, securing the Note, or otherwise.  The exercise by the Lender of any such remedies shall not release or discharge Guarantor from its obligations hereunder unless and until the full amount of the Indebtedness evidenced by the Note and secured as aforesaid has been fully paid and satisfied, and any such release or discharge shall be subject to the provisions of paragraph 4(b) hereof.

11.

This Guaranty shall remain in full force and effect until all obligations of the Borrower under the Underlying Instruments have been satisfied in full and are no longer subject to disgorgement under any applicable state or federal creditor rights or bankruptcy laws.  No delay on the part of the Lender in exercising any options, powers or rights, or the partial or single exercise thereof, shall constitute a waiver thereof.  No waiver of any rights hereunder, and no modification or amendment of this Guaranty, shall be deemed to be made by either party unless the same shall be in writing, duly signed on behalf of such party, and each such waiver (if any) shall apply only with respect to the specific instance involved and shall in no way impair the rights of such party or the obligations of Guarantor to the Lender in any other respect at any other time.  This Guaranty and the rights and obligations of the Lender and of Guar antor hereunder shall be governed and construed in accordance with the laws of the state of California, without regard to its conflicts of law principles and this Guaranty is binding upon Guarantor, Guarantor's heirs, personal representatives and permitted successors or assigns, and shall inure to the benefit of the Lender and its successors or assigns.

12.

Guarantor acknowledges that copies of the Underlying Instruments have been made available to Guarantor and that Guarantor is familiar with their contents.  Guarantor affirmatively agrees that upon any Permitted Transfer effected in accordance with the provisions of the Underlying Instruments or any transfer by Lender of all or any portion of its interest in the Loan, it shall not be necessary for Guarantor to reaffirm its continuing obligations under this Guaranty, but Guarantor will do so upon request by Lender.

13.

GUARANTOR AND LENDER EACH KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE, TO THE EXTENT PERMITTED BY LAW, TRIAL BY JURY IN ANY ACTIONS BROUGHT BY GUARANTOR OR LENDER IN CONNECTION WITH THIS GUARANTY, ANY OF THE LOAN DOCUMENTS, THE INDEBTEDNESS SECURED HEREBY, OR ANY OTHER STATEMENTS OR ACTIONS OF LENDER.

14.

Each notice, consent, request or other communication under this Guaranty (each a "Notice") which any party hereto may desire or be required to give to the other shall be deemed to be adequate and sufficient notice if given in writing and service is made by either (i) registered or certified mail, postage prepaid, in which case such notice shall be deemed to have been received three (3) business days following deposit to U.S. mail; or (ii) nationally recognized overnight air courier, next day delivery, prepaid, in which case

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such notice shall be deemed to have been received one (1) business day following delivery to such nationally recognized overnight air courier.  All Notices shall be addressed to Guarantor at its address given on the first page hereof, or to Lender at c/o Principal Real Estate Investors, LLC, 801 Grand Avenue, Des Moines, Iowa 50392-1450, Attn: Commercial Real Estate Servicing, Loan No. 755502, or to such other place as any party may by notice in writing to the other parties designate as a place for service of notice.

15.

Each Guarantor (if more than one) whose signature appears below shall be deemed to be bound by the provisions of this Guaranty and the Guaranteed Obligations, whether each signature was affixed at the same or different times, and the term "Guarantor" as used herein shall be deemed to refer to each individually, as well as collectively, and each of the undersigned shall be jointly and severally liable for the Guaranteed Obligations hereunder, both personally and with recourse, irrespective of the recourse or non-recourse nature of the Underlying Instruments.  Guarantor agrees that if this Guaranty is placed in the hands of an attorney for enforcement, Guarantor will reimburse Lender all expenses incurred, including attorney's fees.

16.

This Guaranty may be executed in counterparts, each of which shall be deemed an original; and such counterparts when taken together shall constitute but one agreement.

17.

Capitalized terms used herein and not otherwise defined shall have the meanings given to them in the Underlying Instruments.

18.

Guarantor hereby irrevocably authorizes Lender to apply any and all amounts received by Lender in repayment of the Loan first to amounts which are not guaranteed pursuant to the terms of any guaranty and then to amounts which are guaranteed pursuant to the terms of any guaranty.  Guarantor hereby waives any and all rights it has or may have under Section 2822 of the California Civil Code which provides that if a guarantor is "liable upon only a portion of an obligation and the principal provides partial satisfaction of the obligation, the principal may designate the portion of the obligation that is to be satisfied."

19.

In the case of a power of sale foreclosure under the Mortgage, the fair market value of the real property collateral shall be conclusively deemed to be the amount of the successful bid at the foreclosure sale.  Guarantor waives any rights or benefits it may now or hereafter have to a fair value hearing under Section 580a of the California Code of Civil Procedure.  Lender shall have absolutely no obligation to make a bid at any foreclosure sale, but rather may make no bid or bid any amount which Lender, in its sole discretion, deems appropriate.

(Signatures on next page)

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IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be duly executed and delivered as of the date first set forth above.

GUARANTOR:

AIMCO PROPERTIES, L.P., a Delaware limited partnership

By:      AIMCO-GP, Inc., a Delaware   

            corporation, its general partner

            By: /s/Patti K. Fielding

       Name:  Patti K. Fielding

       Title:  Executive Vice President  

                              and Treasurer

EX-10

EXHIBIT 10.26

PROPERTY RESERVES AGREEMENT

755502

THIS PROPERTY RESERVES AGREEMENT (as the same may from time to time hereafter be modified, supplemented or amended, this "Agreement") is made as of January 19, 2007 by VMS NATIONAL PROPERTIES, an Illinois general partnership ("Borrower"), and PRINCIPAL LIFE INSURANCE COMPANY, an Iowa corporation ("Lender").

RECITALS

Lender has agreed to make a loan (the "Loan") in the original principal amount of Thirteen Million and 00/100 Dollars ($13,000,000.00) (the "Loan Amount") to Borrower as set forth in the Loan Documents, executed by and between Lender and Borrower; and

The Loan is evidenced by Borrower's Secured Promissory Note made payable and delivered to Lender (as may be modified, amended, supplemented, extended or consolidated in writing, and any note(s) issued in exchange therefor or in replacement thereof, the "Note") and further evidenced and secured by, among other things, a "Mortgage" (it being agreed that Mortgage as hereinafter used shall be construed to mean "mortgage" or "deed of trust" or "trust deed" or "deed to secure debt" as the context so requires) on certain real estate, together with all existing improvements constructed thereon, said Premises being more particularly described in said Mortgage.

NOW THEREFORE, in consideration of the making of the Loan, the mutual promises and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Lender and Borrower, intending to be legally bound, agree as follows:

1.

Property Reserves.

Borrower has agreed to deposit with Lender a letter of credit(s) (if more than one, collectively if the context so requires the "Letter of Credit") as detailed below to be held by Lender to reimburse Borrower for the costs of certain capital improvements to the Premises as described in Schedule 1 hereto and such other capital improvements to the Premises that Lender determines, in its sole discretion, provide a material benefit/improvement to the Premises upon completion thereof  (i.e. roof replacement/repair, new decks, rehabilitation of individual units) ("Capital Improvements").  The Letter of Credit and any renewal or replacement thereof and any proceeds therefrom shall be held by Lender as additional security for the Loan and are hereafter referred to as the "Property Reserves".  The term "Escrow Release" as used herein shall refer to a disb ursement of funds and/or a reduction of a Letter of Creditas applicable.

a.

On the Closing Date, Borrower shall deliver an acceptable Letter of Credit in the amount of $1,078,452.00 to cover the cost of Capital Improvements.

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2.

Borrower shall deliver to Lender not later than 30 days prior to the expiration date of any Letter of Credit and any renewal or replacement Letter of Credit, a renewal or replacement unconditional, irrevocable bank Letter of Credit identical in terms and amount and issued by a United States bank acceptable to Lender.  If Borrower shall fail to deliver any renewal or replacement Letter of Credit in accordance with the foregoing requirements, Lender may, in its discretion, draw upon any Letter of Credit then in its possession and hold such proceeds in accordance with the terms hereof.

Lender reserves the right to periodically review the financial condition of the issuing bank for any Letter of Credit and any renewal or replacement Letter of Credit and if Lender determines that the issuing bank no longer satisfies the criteria set forth above, Lender may require a replacement Letter of Credit in form and substance and from a United States bank acceptable to Lender.

3.

Standard Disbursement Requirements.  The following shall be defined as "Standard Disbursement Requirements":

(i)

copies of unconditional lien waivers for work completed which is the subject of the Escrow Release request;

(ii)

a title search in form and substance reasonably acceptable to Lender and if such search discloses conditions unacceptable to Lender or Lender deems it reasonably necessary, then such endorsements or other assurances reasonably satisfactory to Lender from the title insurance company insuring the continued first lien priority of the Mortgage;

(iii)

to the extent Lender deems reasonably necessary and to the extent that same are available and appropriate for the work which is the subject of the Escrow Release request, any or all of the following at Lender's discretion:  (A) all permits, bonds, licenses and approvals, whether necessary for commencement, performance, completion, occupancy, use or otherwise required by any applicable laws for the stage of work so completed; (B) a copy of the construction contract and any change orders and addenda thereto; (C) a statement from an architect, contractor or engineering consultant, in Lender's reasonable discretion, as to the extent and cost of the work so completed; and/or (D) other evidence as reasonably determined by Lender showing that Borrower has completed and performed the portion of the work which is the subject of the Escrow Release request; and

(iv)

Lender having inspected, or having expressly waived in writing such inspection, and approved the completed portion of the work which is the subject of the Escrow Release request.  Lender shall not require said inspection more than once per calendar year.

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4.

Capital Improvements.

a.

Except as hereinafter provided and so long as no Event of Default has occurred and is continuing under the Loan Documents, Lender shall allow Escrow Release(s) in the amounts hereinafter specified in accordance with the following terms and conditions:

(i)

Escrow Release(s) shall be for an amount equal to the actual costs and expenses incurred by Borrower in completing any Capital Improvements;

(ii)

Borrower shall submit written Escrow Release requests to Lender for Capital Improvements no more than once per calendar month and each such request shall be for an aggregate amount of not less than $25,000 (excluding the final disbursement); and

(iii)

Escrow Release(s) shall be conditioned upon Borrower furnishing to Lender with its written request, at Lender's discretion, the Standard Disbursement Requirements.

5.

Interest on Property Reserves.  Provided no Event of Default has occurred under any of the Loan Documents, Lender agrees to credit Borrower with interest earnings on the cash portion of the Property Reserves, (excluding however any cash proceeds resulting from Lender having drawn on any Letter of Credit or any renewal or replacement thereof); provided, however, that interest shall cease to be credited on any portion of the Property Reserves at such time as they have been disbursed to Borrower or otherwise applied in any manner provided in this Agreement or in the other Loan Documents.  Interest shall be credited on the average balance of the cash portion of the Property Reserves for the preceding calendar month or any portion of such preceding calendar month on or before the tenth (10^th) day of each calendar month at a rate equal to the thirty-day average of the daily 30-day Dealer Commercial Paper Rate as p ublished in the Wall Street Journal or similar financial publication, less 200 basis points.  Interest shall be disbursed to Borrower at such time and in the same manner as provided for disbursement of Property Reserves.

6.

Administration/Inspection Fee.  Lender shall be entitled to charge Borrower a reasonable processing fee for administering and reviewing an Escrow Release, not to exceed $500.00.  Lender shall also be entitled to charge Borrower reasonable processing fees both for reviewing any renewal or replacement Letter of Credit which Borrower is required to provide as well as for drawing upon any Letter of Credit held pursuant to the terms hereof (the processing fee for reviewing any renewal or replacement Letter of Credit shall not exceed $250.00).  Borrower shall be responsible for payment of all costs, fees and charges in connection with any reduction, renewal or replacement of the Letter of Credit which are assessed by the issuing bank.  Additionally, Lender shall be entitled to charge Borrower for any reasonable costs incurred by Lender in inspecting the Premises, not to exceed $750.00.

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7.

Security Agreement.  This Agreement and the escrow of the Property Reserves under the terms hereof are intended to create a prior perfected security interest in the Property Reserves.  As more fully described in the Loan Documents, Borrower has assigned, conveyed, pledged and transferred to Lender and granted to Lender a first and continuing lien on and security interest in and to, among other things, all of Borrower's right, title and interest in and to the Property Reserves, which secure the full and punctual payment and performance of all of the Indebtedness.  Nothing contained herein shall cause Lender to be deemed a trustee of any Letter of Credit, any renewal thereof or any proceeds therefrom.  The Property Reserves shall not constitute any deposit or account of the Borrower or monies to which the Borrower is entitled upon demand, or upon the mere passage of time.  Lender shall not be required to s egregate the Property Reserves or hold them in any separate account for the benefit of the Borrower.  Upon the payment in full of all sums due to Lender under the Loan Documents, Lender shall promptly deliver the then existing Property Reserves to Borrower.

8.

Event of Default.  Upon the occurrence of an Event of Default under any of the Loan Documents, Lender may, with respect to the Property Reserves, or any portion thereof, exercise all enforcement rights and remedies granted to Lender under the Loan Documents and in addition to all other rights and remedies granted to Lender under the Loan Documents, Lender may, at its option, use such funds partially or in full (including any portion or all of the proceeds resulting from drawing on any Letter of Credit), in such order and preference as Lender may determine, to (1) cure or partially cure any Event of Default; (2) complete the work which is the subject of this Agreement; (3) pay any interest accrued under the terms of the Note; (4) pay any other Indebtedness; (5) pay the Make Whole Premium, if any, due and payable; (6) prepay the principal amount of the Loan or any part thereof; or (7) hold such funds in a non-interest bearing account as additional security for the Loan.  In the event the Property Reserves or any portion thereof are applied to prepay the principal amount of the Loan or any part thereof, Borrower waives any right to prepay the principal amount in whole or in part without premium, and agrees to pay, as liquidated damages and not as a penalty, a Make Whole Premium on any principal amount prepaid.  Notwithstanding anything contained herein to the contrary, nothing shall be construed to (a) make Lender responsible for performing or completing the work which is the subject of this Agreement, (b) require Lender to expend sums to complete the work which is the subject of this Agreement which are in excess of such amounts then allocated by Lender for such items, or (c) obligate Lender to demand from Borrower additional sums to complete the work which is the subject of this Agreement.

9.

Cost Overruns.  In the event that the costs and expenses incurred by Borrower in completing any work which is the subject of this Agreement exceed the respective amounts allocated by Lender for such items of expense, Borrower shall be responsible for the payment (from sources other than the Property Reserves) of such excess costs and expenses.

10.

Notices.  All notices required to be sent hereunder shall be deemed to be an adequate and sufficient notice if given in accordance with the notice provisions of the Mortgage.

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11.

Governing Law.  This Agreement shall be governed, construed, and enforced in accordance with the laws of the state in which the Premises is located, without regard to its conflicts of law principles.

12.

Headings.  The headings used herein are for convenience only and are not to be used in interpreting this Agreement.  Capitalized terms used herein and not otherwise defined shall have those meanings given to them in the Loan Documents.  Notwithstanding anything herein to the contrary, the terms and provisions of this Agreement as to Escrow Release(s) shall control over any provisions in the other Loan Documents to the contrary.

13.

Amendments.  This Agreement, and any provisions hereof, may not be modified, amended, waived, extended, changed, discharged or terminated orally or by any act or failure to act on the part of Borrower or Lender, but only by an agreement in writing signed by the parties hereto.

14.

Counterparts.  This Agreement may be executed in counterparts, each of which shall be deemed an original; and such counterparts when taken together shall constitute but one agreement.

15.

Inapplicable Provisions.  If any term, covenant or condition of this Agreement is held to be invalid, illegal or unenforceable in any respect, this Agreement shall be construed without such provision.

16.

Successors and Assigns.  This Agreement and all the provisions hereof shall inure to the benefit of the heirs, successors and assigns of Lender and shall bind the heirs, representatives, and permitted successors and assigns of Borrower.

(Signatures on next page)

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IN WITNESS WHEREOF, Borrower and Lender have hereunto caused this Agreement to be executed the date first above written.

LENDER:

PRINCIPAL LIFE INSURANCE COMPANY, an Iowa corporation

By:

PRINCIPAL REAL ESTATE INVESTORS, LLC, a Delaware limited liability company, its authorized signatory

By

__________________________

Name:

Title:

By

__________________________

Name:

Title:

(Signatures continued on following page)

-7-

BORROWER:

VMS NATIONAL PROPERTIES, an Illinois general partnership

By:

VMS NATIONAL RESIDENTIAL PORTFOLIO I, an Illinois limited partnership

By:

MAERIL, INC., a Delaware  

                        corporation, its general partner

       By: /s/Patti K. Fielding

       Name:  Patti K. Fielding

                Title:  Executive Vice President  

                           and Treasurer

By:

VMS NATIONAL RESIDENTIAL PORTFOLIO II, an Illinois limited partnership

By:

MAERIL, INC., a Delaware  

                        corporation, its general partner

       By: /s/Patti K. Fielding

       Name:  Patti K. Fielding

                Title:  Executive Vice President  

                           and Treasurer

EX-10

EXHIBIT 10.27

SECURED PROMISSORY NOTE

755501

$13,300,000.00

January 19, 2007

1.

FOR VALUE RECEIVED, VMS NATIONAL PROPERTIES, an Illinois general partnership, as "Borrower" ("Borrower"), hereby promises to pay to the order of PRINCIPAL LIFE INSURANCE COMPANY, an Iowa corporation (as "Lender"), the principal sum of Thirteen Million Three Hundred Thousand and 00/100 Dollars ($13,300,000.00) or so much thereof as shall from time to time have been advanced, together with interest on the unpaid balance of said sum from January 19, 2007 (the "Closing Date"), at the rate of six and sixteen one-hundredths percent (6.16%) per annum.  

A payment of interest from the Closing Date to and including January 31, 2007 shall be paid on the Closing Date calculated by multiplying the actual number of days elapsed in the period for which interest is being calculated by a daily rate based on the foregoing annual interest rate and a 360-day year.  Thereafter, interest shall be computed on the unpaid balance on the basis of a 360-day year composed of twelve 30-day months.  Beginning on March 1, 2007, interest shall be due and payable in installments of Sixty-eight Thousand Two Hundred Seventy-three and 33/100 Dollars ($68,273.33), with an installment in a like amount due and payable on the same day of each month thereafter, and except as otherwise provided in this Note, all remaining principal and interest to the date of payment and other indebtedness shall be due and payable on February 1, 2010 ("Call Date").  Lender shall have the right to declare this Note to be due and payable in full on the Call Date or to adjust the per annum interest rate on the Rate Adjustment Date to an interest rate established by Lender ("Adjusted Interest Rate") as herein provided (and apply an amortization schedule, if any, as herein provided).  In the event Lender elects to declare this Note to be due and payable, this Note shall become due and payable, in full, without a Make Whole Premium on the Call Date.  In the event Lender elects to adjust the interest rate, then on February 1, 2010 ("Rate Adjustment Date") the per annum interest rate shall be adjusted to the Adjusted Interest Rate and commencing on March 1, 2010, monthly installments of principal (if applicable) and interest shall be due and payable on the same day of each month thereafter, except that all remaining principal and interest to the date of payment shall be due and payable on February 1, 2012 or such earlier date resulting from acceleration of the Indebtedness by Lender ("Maturity Date").  Each installment shall be credited first upon interest then accrued and the remainder upon principal.  All principal and interest shall be paid in lawful money of the United States of America, by wire transfer of immediately available funds to Lender.  Any other monthly deposits or payments Borrower is required to make to Lender under the terms of the Loan Documents shall be made by the same payment method and on the same date as the installments of principal and interest due under this Note.

Lender shall notify Borrower in writing ("Lender's Election Notice") on or before November 1, 2009 of Lender's election to adjust the interest rate or of Lender's intention to

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declare this Note to be due and payable in full.  In the event Lender elects to adjust the interest rate, Lender's Election Notice will contain (i) the number of basis points ("Spread") and the United States Treasury Issue (which shall be the two (2) year United States Treasury Issue) that Lender anticipates it will use to establish the Adjusted Interest Rate and (ii) the amortization schedule Lender has elected to apply, if any.  The Spread shall be determined by Lender in its sole discretion based on Lender's evaluation of:  (i) the then current financial performance and projected risk of the Premises, which shall encompass various factors, including but not limited to contract debt service coverage, loan-to-value ratio, economic debt service coverage, occupancy, frequency of tenant rollover, financial strength and stability of tenants; (ii) the then current financial status of Borrower, which shall include but not be l imited to creditworthiness, financial strength, percentage of liabilities to liquid assets, and annual net income; and (iii) the remaining term and current outstanding balance of the Note.  

At any time and from time to time before the Adjusted Interest Rate is established, provided at least seven (7) days have elapsed since the previous Lender's Election Notice, Lender may establish a new Spread which Lender anticipates it will use to establish the Adjusted Interest Rate and notify Borrower of the same.  The Adjusted Interest Rate and amortization schedule, if any, must be established by mutual written agreement of Lender and Borrower by December 1, 2009 (the "Rate Set Deadline").  The Adjusted Interest Rate may only be established by mutual written agreement of Lender and Borrower and simultaneous payment by Borrower of Twelve Thousand Three Hundred and 00/100 Dollars ($12,300.00) ("Rate Adjustment Fee"). Notwithstanding anything contained herein to the contrary in the event:  (i) Lender notifies Borrower of its intention to declare this Note to be due and payable in full, (ii) Lender and Borrower are unable for any reason to mutually agree in writing on the Adjusted Interest Rate by the Rate Set Deadline; or (iii) Borrower fails to pay the Rate Adjustment Fee to Lender when due, this Note shall become due and payable in full, on the Call Date, without a Make Whole Premium, and all principal, interest accrued or to accrue to the date of prepayment at the rate in effect at the time of the initial Lender's Election Notice, and all other Indebtedness shall become immediately due and payable in full.  Notwithstanding any other provision herein, Lender shall not be obligated to adjust the interest rate if any default exists under this Note or the Loan Documents.

In the event Borrower accepts the Adjusted Interest Rate, then notwithstanding anything herein or in any of the Loan Documents to the contrary, Borrower shall have no right to prepay the Loan at par during the Open Period and any prepayment will be subject to a Make Whole Premium for the period ending on the Maturity Date calculated at the Adjusted Interest Rate.

In the event Borrower accepts the Adjusted Interest Rate, Borrower is required to provide Lender the following:

(i)

a new ALTA standard loan title policy for the Loan or an endorsement updating said title policy in the full amount of the in form and by an issuer satisfactory to Lender at the time of the rate adjustment unless (x) the outstanding balance of the

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Loan at the time of the Call Date is equal to or less than $20,000,000.00, (y) no liens or encumbrances exist against the Premises except as previously approved by Lender in the Deed of Trust, and (z) no mortgages or deeds of trust exist against the Premises except for the Mortgage.  Borrower further agrees that the policy shall insure Lender's Deed of Trust, at the Adjusted Interest Rate to be a first and prior lien subject only to those exceptions which were previously approved by Lender and provide coverage against mechanic's liens;

(ii)

an amendment to the Note in form and substance satisfactory to Lender executed by Borrower evidencing the Adjusted Interest Rate and a representation that the Premises is free and clear of any liens, privileges, mortgages or encumbrances except as expressly permitted in the Deed of Trust;

(iii)

a usury opinion or endorsement to the title policy acceptable to Lender if Lender reasonably believes that the Adjusted Interest Rate is or may be usurious; and

(iv)

a title search acceptable to Lender and reimbursement for Lender's costs incurred in obtaining the same.

2.

No privilege is reserved by Borrower to prepay any principal of this Note prior to the Maturity Date, except on or after the date hereof, privilege is reserved, after giving thirty (30) days' prior written notice to Lender, to prepay in full, but not in part, all principal and interest to the date on which payment is made, along with all sums, amounts, advances, or charges due under any instrument or agreement by which this Note is secured, upon the payment of a "Make Whole Premium" if required by the schedule below, provided that Borrower simultaneously exercises its right to prepay the Other Note as provided for therein.  The Make Whole Premium shall be based on the following schedule:

(i)

if prepayment occurs prior to March 1, 2008 or after February 1, 2010 and prior to March 1, 2011, the Make Whole Premium shall be one-half percent (.50%) of the principal amount to be prepaid;

(ii)

provided no Event of Default exists, during the period beginning on or after March 1, 2008 to and including February 1, 2010 or on or after March 1, 2011 to and including February 1, 2012 (each collectively the "Open Period") no Make Whole Premium shall be payable.

3.

Borrower agrees that if Lender accelerates the whole or any part of the principal sum evidenced hereby after the occurrence of an Event of Default but prior to the Open Period, Borrower waives any right to prepay said principal sum in whole or in part without premium and agrees to pay, as yield maintenance protection and not as a penalty, the Make Whole Premium.  

-4-

In the event any proceeds from a casualty or Taking of the Premises are applied to reduce the principal balance hereof, such reduction shall be made without a Make Whole Premium, provided no Event of Default then exists under the Loan Documents.

Borrower by adding its initials to the end of this paragraph, (A) expressly waives any rights it may have under California Civil Code Section 2954.10 to prepay this Note, in whole or in part, without penalty, upon acceleration of the Indebtedness and (B) acknowledges and agrees that Borrower has no right of prepayment of this Note, except as provided above; and that, if the maturity of this Note is accelerated by Lender, Borrower specifically agrees to pay as a prepayment premium, the applicable sum specified herein as the Make Whole Premium, specifically including but not limited to the case where the holder of this Note has accelerated the maturity of this note due to Borrower's default of any provision contained in 2(f) of the Deed of Trust.  By initialing this provision, Borrower hereby declares that Lender's agreement to make the Loan evidenced by this Note for the interest rate and for the term set forth in this Note con stitutes adequate consideration, given individual weight by Borrower, for this waiver and agreement.

Initials: ________________    ________________

4.

If any payment of principal, interest, or other Indebtedness is not made when due, damages will be incurred by Lender, including additional expense in handling overdue payments, the amount of which is difficult and impractical to ascertain.  Borrower therefor agrees to pay, upon demand, the sum of four cents ($.04) for each one dollar ($1.00) of each said payment which becomes overdue ("Late Charge") as a reasonable estimate of the amount of said damages, subject, however, to the limitations contained in paragraph 6 hereof.

Notwithstanding anything hereinabove to the contrary, the Late Charge assessed on any amount due on the Maturity Date or the Call Date (if Lender declares this note due and payable as described hereinabove) but not then paid, whether or not by acceleration, shall not be four cents for each one dollar as described above, but shall instead be a sum equal to the interest which would have accrued on the principal balance then outstanding from the date the payment was due to the end of the month in which the Maturity Date or Call Date (if applicable) occurs.  Such Late Charge shall be in addition to interest otherwise accruing under this Note.

5.

If any Event of Default has occurred and is continuing under the Loan Documents, the entire principal balance of the Loan, interest then accrued, and Make Whole Premium, and all other Indebtedness whether or not otherwise then due, shall at the option of Lender, become immediately due and payable without demand or notice, and whether or not Lender has exercised said option, interest shall accrue on the entire principal balance, interest then accrued, Make Whole Premium and any other Indebtedness then due, at a rate equal to the Default Rate until fully paid.

6.

Notwithstanding anything herein or in any of the other Loan Documents to the contrary, no provision contained herein or therein which purports to obligate Borrower to pay any amount

-5-

of interest or any fees, costs or expenses which are in excess of the maximum permitted by applicable law, shall be effective to the extent it calls for the payment of any interest or other amount in excess of such maximum.  All agreements between Borrower and Lender, whether now existing or hereafter arising and whether written or oral, are hereby limited so that in no contingency, whether by reason of demand for payment or acceleration of the maturity hereof or otherwise, shall the interest contracted for, charged or received by Lender exceed the maximum amount permissible under applicable law.  If, from any circumstance whatsoever, interest would otherwise be payable to Lender in excess of the maximum lawful amount, the interest payable to Lender shall be reduced to the maximum amount permitted under applicable law; and if from any circumstance Lender shall ever receive anything of value deemed interest by applicable law in excess of the ma ximum lawful amount, an amount equal to any excessive interest shall, at the option of Lender, be refunded to Borrower or be applied to the reduction of the principal hereof, without a Make Whole Premium and not to the payment of interest or, if such excessive interest exceeds the unpaid balance of principal hereof such excess shall be refunded to Borrower.  This paragraph shall control all agreements between Borrower and Lender.

7.

Borrower and any endorsers or guarantors waive presentment, protest and demand, notice of protest, demand and dishonor and nonpayment, and agree the Maturity Date of this Note or any installment may be extended without affecting any liability hereunder, and further promise to pay all reasonable costs and expenses, including but not limited to, reasonable attorney's fees incurred by Lender in connection with any default or in any proceeding to interpret and/or enforce any provision of the Loan Documents.  No release of Borrower from liability hereunder shall release any other maker, endorser or guarantor hereof.

8.

This Note is secured by the Loan Documents creating among other things legal and valid encumbrances on and an assignment of all of Borrower's interest in any Leases of the Premises located in the county of Los Angeles, State of California.  Capitalized terms used herein and not otherwise defined shall have those meanings given to them in the Loan Documents.  In no event shall such documents be construed inconsistently with the terms of this Note, and in the event of any discrepancy between any such documents and this Note, the terms hereof shall govern.  The proceeds of this Note are to be used for business, commercial, investment or other similar purposes, and no portion thereof will be used for any personal, family or household use.  This Note shall be governed by and construed in accordance with the laws of the State where the Premises is located, without regard to its conflict of law principles.

9.

Notwithstanding any provision to the contrary in this Note or the Loan Documents and except as otherwise provided for below, the liability of Borrower under the Loan Documents shall be limited to the interest of Borrower in the Premises and the Rents.  In the event of foreclosure of the liens evidenced by the Loan Documents, no judgment for any deficiency upon the Indebtedness evidenced by the Loan Documents shall be sought or obtained by Lender against Borrower.  Nothing herein shall in any manner limit or impair (i) the lien or enforcement of the Loan Documents pursuant to the terms thereof or (ii) the obligations of any indemnitor or guarantor, if any.

-6-

Notwithstanding any provision hereinabove to the contrary, Borrower shall be personally liable to Lender for:

(a)

any loss or damage to Lender arising from (i) the sale or forfeiture of the Premises resulting from Borrower's failure to pay any of the taxes, assessments or charges specified in the Loan Documents or (ii) Borrower's failure to insure the Premises in compliance with the provisions of the Loan Documents;

(b)

any event or circumstance for which Borrower indemnifies Lender under the Environmental Indemnity;

(c)

nonpayment of taxes, assessments, insurance premiums and utilities for the Premises and any penalty or late charge associated with nonpayment thereof prior to the Sale (as defined below) of the Premises;

(d)

any loss or damage to the Premises as a result of waste, gross negligence or willful misconduct by Borrower;  

(e)

intentionally deleted;

Borrower's personal liability for items specified in (c) and (d) above shall be limited to the amount of rents, issues, proceeds and profits from the Premises ("Rents and Profits") received by Borrower for the twenty-four (24) months preceding an Event of Default and thereafter; but less any such Rents and Profits applied to (A) payment of principal, interest and other charges when due under the Loan Documents, or (B) payment of expenses for the operation, maintenance, taxes, assessments, utility charges and insurance of the Premises including sufficient reserves for the same or replacements or renewals thereof ("Operation Expense(s)") provided that (x) Borrower has furnished Lender with evidence reasonably satisfactory to Lender of the Operation Expenses and payment thereof, and (y) any payments to parties related to Borrower shall be considered an Operation Expense only to the extent that the amount expended for the Operation Expense does not exceed the then current market rate for such Operation Expense.

(f)

misapplication or misappropriation of rents in violation of the Loan Documents;  

(g)

any security deposits of tenants not otherwise applied in accordance with the terms of the Lease(s), together with any interest on such security deposits required by law or the leases, not turned over to Lender upon conveyance of the Premises to Lender pursuant to foreclosure or power of sale or by a deed acceptable to Lender in form and content;

-7-

(h)

any loss or damage to Lender arising from the misapplication or misappropriation of tax reserve accounts, tenant improvement reserve accounts, security deposits, prepaid rents or other similar sums paid to or held by Borrower or any other entity or person in connection with Borrower’s operation of the Premises;

(i)

any insurance or condemnation proceeds or other similar funds or payments applied by Borrower in a manner other than as expressly provided in the Loan Documents;

(j)

any loss or damage to Lender arising from any fraud or willful misrepresentation by or on behalf of Borrower, Interest Owner or any guarantor regarding the Premises, the making or delivery of any of the Loan Documents or in any materials or information provided by or on behalf of Borrower, Interest Owner or guarantor, if any, in connection with the Loan; and

(k)

any loss or damage to Lender arising from the loss of Lender’s perfection or priority of its security interest in personal property or fixtures covered under any UCC financing statement due to borrower’s failure to notify Lender as provided for in paragraph 1(h) of the Mortgage.

Notwithstanding anything contained in paragraphs 9(a)(i) and 9(c) hereinabove as it relates solely to taxes, assessments and insurance premiums, to the extent Lender is impounding for taxes, assessments and insurance premiums in accordance with the Loan Documents and Borrower has fully complied with all terms and conditions of the Loan Documents relating to impounding for the same, then Borrower shall not be personally liable for Lender's failure to apply any of said impound amounts held by Lender in accordance with the Loan Documents.

Notwithstanding anything to the contrary in the Loan Documents, the limitation on liability contained in the first paragraph of this paragraph 9 SHALL BECOME NULL AND VOID and shall be of no further force and effect in the event:

(y)

of any breach or violation of paragraph 2(f) (due on sale or encumbrance) of the Mortgage, other than (i) the filing of a nonmaterial mechanic's lien affecting the Premises or a mechanic's lien affecting the Premises for which Borrower has complied with the provisions of paragraph 1(e) of the Mortgage, or (ii) the granting of any utility or other nonmaterial easement or servitude burdening the Premises, or (iii) any transfer or encumbrance of a nonmaterial economic interest in the Premises not otherwise set forth in (i) or (ii), or (iv) an immaterial breach or violation of the Property Transfer Requirements, Ownership Transfer Requirements, Specific Transfer Requirements I-V or the Mezzanine Financing Requirements; or

-8-

(z)

of any filing by Borrower of a petition in bankruptcy or insolvency or a petition or answer seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under the Bankruptcy laws of the United States or under any other applicable federal, state or other statute or law.

10.

If more than one, all obligations and agreements of Borrower are joint and several.

11.

This Note may not be changed or terminated orally, but only by an agreement in writing and signed by the party against whom enforcement of any waiver, change, modification or discharge is sought.  All of the rights, privileges and obligations hereunder shall inure to the benefit of the heirs, successors and assigns of Lender and shall bind the heirs and permitted successors and assigns of Borrower.  

12.

If any provision of this Note shall, for any reason, be held to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision hereof, but this Note shall be construed as if such invalid or unenforceable provision had never been contained herein.

13.

This Note may be executed in counterparts, each of which shall be deemed an original; and such counterparts when taken together shall constitute but one agreement.

14.

This provision does not represent a commitment by Lender to lend additional dollars (the "Additional Advance") to Borrower, as Lender is under no obligation to make an Additional Advance. Borrower may request Lender to fund to Borrower an additional advance of principal ("Request for Advance"), provided the requested Additional Advance, in combination with the original Loan, meet certain "Minimum Economic Criteria" (set forth below).    

If Lender does choose to make an Additional Advance, the following conditions precedent must be satisfied:

The "Minimum Economic Criteria" are:

(a)

The combined outstanding Indebtedness on the original Loan and the Additional Advance does not exceed seventy-seven percent (77%) of the appraised value of the Premises as established by an appraisal of the Premises prepared by an MAI appraiser approved by Lender and in form and substance acceptable to Lender, said appraisal at Borrower's cost;

(b)

Debt service of coverage of 1.20 times the annual debt service on the combined outstanding Indebtedness on the original Loan and the Additional Advance, as determined by Lender.  The debt service coverage shall be the annual net operating income divided by the total annual installment payments due under the combined outstanding Indebtedness on the original Loan and the Additional Advance, including accrued or capitalized interest.  Only net operating income from approved executed Leases in effect

-9-

on the Premises with no uncured defaults shall be used in Lender's determination of the foregoing.  Borrower shall provide a certified rent roll with its Request for Advance; and

(c)

At the time of the Request for Advance, at least twelve (12) months must remain in the Loan term.

Provided no Event of Default exists under the Loan Documents, if Lender determines that the Minimum Economic Criteria are satisfied, Lender may notify Borrower in writing ("Lender's Notice") of the number of basis points ("Spread") and the United States Treasury Issue ("Treasury Issue") that Lender will use to establish the interest rate applicable to the Additional Advance ("AA Interest Rate").  The Spread shall be determined by the Lender, in its sole discretion.

At any time and from time to time before the date that the AA Interest Rate is agreed to, provided at least seven (7) days have elapsed since the previous Lender's Notice, Lender may establish a new Spread which Lender anticipates it will use to establish the AA Interest Rate and notify Borrower of the same.  The AA Interest Rate must be established by the date which is 30 days following the date of the initial Lender's Notice (the "AA Rate Set Deadline").  The AA Interest Rate may only be established on a date mutually agreed to by Lender and Borrower. If Borrower fails to respond to the most current Lender's Notice in writing by the AA Rate Set Deadline, all of the Lender's Notices shall be deemed rejected.  If Borrower rejects the terms set forth in the Lender's Notice, Borrower shall then have the right to obtain Mezzanine Financing on the terms set forth in the Mortgage.  If Borrower accepts the terms set forth in Lender's Notice, Lender shall agree to fund the Additional Advance, provided the following closing conditions ("Closing Conditions") are met:

(a)

Borrower's execution, delivery, acknowledgement and recordation, as applicable, of acceptable documentation evidencing and securing the Additional Advance including, but not limited to, additional note(s), revised and/or replacement loan modification agreements, indemnification agreements, escrow security or property reserve agreements, security instruments, financing statements, UCCs, new or revised letters of credit and/or guarantees in form and substance satisfactory to Lender;

(b)

Receipt of either (at Lender's discretion) a new ALTA standard loan policy or an endorsement updating the Lender's existing loan policy in the full amount of the Loan (as increased by the Additional Advance), in form and by an issuer satisfactory to Lender, and which insures the Mortgage to be a first and prior lien subject only to those exceptions which were previously approved by Lender and provides coverage against usury and mechanic's liens (an acceptable usury opinion can be substituted for the usury coverage);

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(c)

Compliance with Lender's then current underwriting and closing due diligence requirements.

(d)

Receipt of acceptable third party reports addressing property physical and environmental condition, upon request of Lender, prepared by consultants acceptable to Lender;

(e)

Payment by Borrower of all third party expenses incurred, including but not limited to outside counsel fees and costs;

(f)

Payment of Borrower of an "Additional Advance Fee" equal to .5% of the amount of the Additional Advance.  The Additional Advance Fee is non-refundable and is due upon Borrower's acceptance of the terms set forth in the Lender's Notice.

In the event (i) Lender does not choose to make the Additional Advance; (ii) Borrower rejects the terms set forth in the Lender's Notice, or (iii) Borrower is unable to satisfy the Closing Conditions, Borrower shall have the ability to obtain Mezzanine Financing as more particularly described in paragraph 2(f) of the Mortgage.

(Signatures on next page)

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IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed and delivered as of the date first set forth above.

VMS NATIONAL PROPERTIES, an Illinois general partnership

By:

VMS NATIONAL RESIDENTIAL PORTFOLIO I, an Illinois limited partnership

By:

MAERIL, INC., a Delaware  

                        corporation, its general partner

       By: /s/Patti K. Fielding

       Name:  Patti K. Fielding

                Title:  Executive Vice President  

                           and Treasurer

By:

VMS NATIONAL RESIDENTIAL PORTFOLIO II, an Illinois limited partnership

By:

MAERIL, INC., a Delaware  

                        corporation, its general partner

       By: /s/Patti K. Fielding

       Name:  Patti K. Fielding

                Title:  Executive Vice President  

                           and Treasurer

EX-10

EXHIBIT 10.28

Record and return to:

Principal Life Insurance Company

c/o Principal Real Estate Investors, LLC

801 Grand Avenue

Des Moines, IA  50392-1360

ATTN:  Erin Coghlan

DEED OF TRUST, SECURITY AGREEMENT

ASSIGNMENT OF RENTS AND FIXTURE FILING

THE NOTE SECURED BY THIS DEED OF TRUST CONTAINS AN

ADJUSTABLE INTEREST RATE

755501

A.

THIS DEED OF TRUST, SECURITY AGREEMENT AND ASSIGNMENT OF RENTS AND FIXTURE FILING (as the same may from time to time hereafter be modified, supplemented or amended, this "Deed of Trust") is made as of January 19, 2007, by and between VMS NATIONAL PROPERTIES, an Illinois general partnership, having its principal place of business and post office address at 4582 South Ulster Street Parkway, Suite 1100, Denver, Colorado 80237, as "Borrower" ("Borrower" to be construed as "Borrowers" if the context so requires), Brenda S. Tyler, of 801 Grand Avenue, Des Moines, Iowa, as "Trustee", and PRINCIPAL LIFE INSURANCE COMPANY, an Iowa corporation, as "Lender".

WITNESSETH:

B.

Borrower is justly indebted to Lender for money borrowed (the "Loan") in the original principal sum of Thirteen Million Three Hundred Thousand and 00/100 Dollars ($13,300,000.00) (the "Loan Amount") evidenced by Borrower's secured promissory note of even date herewith, made payable and delivered to Lender (as may be modified, amended, supplemented, extended or consolidated in writing and any note(s) issued in exchange therefor or replacement thereof) (the "Note"), in which Note Borrower promises to pay to Lender the Loan Amount, together with all accrued and unpaid interest thereon, interest accrued at the Default Rate (if any), Late Charges (if any), the Make Whole Premium (if any), and all other obligations and liabilities due or to become due to Lender pursuant to the Loan Documents and all other amounts, sums and expenses paid by or payable to Lender pursuant to the Loan Documents and the Environmental Indemnity (collectively the "Indebtedness") until the Indebtedness has been paid, but in any event, the unpaid balance (if any) remaining due on the Note shall be due and

2

payable on February 1, 2012 (the "Maturity Date") or such earlier date resulting from the acceleration of the Indebtedness by Lender.  Capitalized terms used herein and not otherwise defined shall have those meanings given to them in the other Loan Documents

C.

NOW, THEREFORE, to secure the payment of the Indebtedness in accordance with the terms and conditions of the Loan Documents, and all extensions, modifications, and renewals thereof and the performance of the covenants and agreements contained therein, and also to secure the payment of any and all other Indebtedness, direct or contingent, that may now or hereafter become owing from Borrower to Lender in connection with the Loan Documents, and in consideration of the Loan Amount in hand paid, receipt of which is hereby acknowledged, Borrower does by these presents irrevocably grant, transfer and assign in trust with power of sale and right of entry and possession unto Trustee, its successors and assigns forever, that certain real estate and all of Borrower's estate, right, title and interest therein, located in the county of Los Angeles, state of California, more particularly described in Exhibit A attached hereto and made a part hereof (the "Land"), which Land, together with the following described property, rights and interests, is collectively referred to herein as the "Premises".

D.

Together with Borrower's interest as lessor in and to all Leases and all Rents, which are pledged primarily and on a parity with the Land and not secondarily.

E.

Together with all and singular the tenements, hereditaments, easements, appurtenances, passages, waters, water courses, riparian rights, direct flow, ditch, reservoir, well and other water rights, whether or not adjudicated, whether tributary or nontributary and whether evidenced by deed, water stock, permit or otherwise, sewer rights, rights in trade names, licenses, permits and contracts, and all other rights, liberties and privileges of any kind or character in any way now or hereafter appertaining to the Land, including but not limited to, homestead and any other claim at law or in equity as well as any after-acquired title, franchise or license and the reversion and reversions and remainder and remainders thereof.

F.

Together with the right in the case of foreclosure hereunder of the encumbered property for Lender to take and use the name by which the buildings and all other improvements situated on the Premises are commonly known and the right to manage and operate the said buildings under any such name and variants thereof.

G.

Together with all right, title and interest of Borrower in any and all buildings and improvements of every kind and description now or hereafter erected or placed on the said Land and all materials intended for construction, reconstruction, alteration and repairs of such buildings and improvements now or hereafter erected thereon, all of which materials shall be deemed to be included within the Premises immediately upon the delivery thereof to the Premises, and all fixtures now or hereafter owned by Borrower and attached to or contained in and used exclusively in connection with the Premises including, but not limited to, all machinery, motors, elevators, fittings, radiators, awnings, shades, screens, all gas and electric fixtures, appliances (including without limitation, ranges, rangetops, ovens, stoves, cooking apparatus and appurtenances, dishwashers, refrigerators, trash compactors, microwaves, washers, dryers, and

3

garbage disposals), water heaters, mirrors, mantels, carpeting and all other floor coverings, window coverings and treatments, cable television equipment, water softeners, storm sashes, and all plumbing, heating, lighting, ventilating, refrigerating, incinerating, air-conditioning and sprinkler equipment and fixtures and appurtenances thereto; and all items of furniture, furnishings, equipment and personal property owned by Borrower used exclusively in the operation of the Premises; and all renewals or replacements of all of the aforesaid property owned by Borrower or articles in substitution therefor, whether or not the same are or shall be attached to said buildings or improvements in any manner (collectively, the "Improvements"); it being mutually agreed, intended and declared that all the aforesaid property owned by Borrower and placed by it on the Land or used exclusively in connection with the operation or maintenance of the Premi ses shall, so far as permitted by law, be deemed to form a part and parcel of the Land and for the purpose of this Deed of Trust to be Land and covered by this Deed of Trust, and as to any of the property aforesaid which does not form a part and parcel of the Land or does not constitute a "fixture" (as such term is defined in the Uniform Commercial Code ("UCC")), this Deed of Trust and the other Loan Documents (the terms of which grant a security interest in personal property or real property, the proceeds of which may become personal property) are each hereby deemed to be, as well, a security agreement under the UCC for the purpose of creating a security interest in all items, including, but not limited to, all property and rights which Borrower may grant, assign, bargain, sell, transfer, set over, deliver, or otherwise convey to Lender, as secured party, under the terms of this Deed of Trust or any of the other Loan Documents, including any and all proceeds thereof (as used herein, Borr ower shall mean "Debtor" under the UCC and Lender shall mean "Secured Party" under the UCC).  Borrower hereby appoints Lender as its attorney-in-fact to execute such documents necessary to perfect Lender's security interest and authorizes Lender at any time until the Indebtedness is paid in full, to prepare and file, at Borrower's expense, any and all UCC financing statements, amendments, assignments, terminations and the like, necessary to create and/or maintain a prior security interest in such property all without Borrower's execution of the same.  Furthermore, upon a default under the Loan Documents, Lender will, in addition to all other remedies provided for in the Loan Documents, have the remedies provided for under the UCC in effect in the state in which the Premises is located.

H.

Together with all right, title and interest of Borrower, now or hereafter acquired, in and to any and all strips and gores of land adjacent to and used in connection with the Premises and all right, title and interest of Borrower, now owned or hereafter acquired, in, to, over and under the ways, streets, sidewalks and alleys adjoining the Premises.  

I.

Together with all funds now or hereafter held by Lender under any property reserves agreement (including any proceeds derived from any letter of credit) or escrow security agreement or under any of the terms hereof or of the Loan Documents, including but not limited to funds held under the provisions of paragraph 5 hereof.

J.

Together with all of Borrower's payment intangibles, letter of credit rights, interest rate cap agreements, tenant in common agreement rights, and any other contract rights of Borrower related in any manner to the ownership, operation, or management of the Premises, as well as any

4

and all supporting obligations, and all proceeds, renewals, replacements and substitutions thereof.

K.

Together with all funds, accounts and proceeds thereof relating to the Premises whether or not such funds, accounts or proceeds thereof are held by Lender under the terms of any of the Loan Documents, including, but not limited to bankruptcy claims of Borrower against any tenant at the Premises, and any proceeds thereof; proceeds of any Rents, insurance proceeds from all insurance policies required to be maintained by Borrower under the Loan Documents and all awards, decrees, proceeds, settlements or claims for damage now or hereafter made to or for the benefit of Borrower by reason of any damage to, destruction of or taking of the Premises or any part thereof, whether the same shall be made by reason of the exercise of the right of eminent domain or by condemnation or otherwise (a "Taking").

L.

TO HAVE AND TO HOLD the same unto Trustee, Trustee's successors and assigns, upon the trusts, covenants and agreements herein expressed.  

M.

Borrower represents that it is the absolute owner in fee simple of the Premises described in Exhibit A, which Premises are free and clear of any liens or encumbrances except as set forth in the loan policy of title insurance for the Premises issued to Lender, and except for taxes which are not yet due or delinquent.  Borrower shall forever warrant and defend the title to the Premises against all claims and demands of all persons whomsoever and will on demand execute any additional instrument which may be required to give Trustee a valid first lien on all of the Premises, subject to the "Permitted Encumbrances" set forth in the loan policy of title insurance for the Premises issued to Lender.  

N.

Borrower further represents that (i) the Premises is not subject to any casualty damage; (ii) Borrower has not received any written notice of any eminent domain or condemnation proceeding affecting the Premises; (iii) all leasing broker fees and commissions payable by Borrower with respect to the Lease(s) have been paid in full, in cash or other form of immediately available funds; (iv) to the best of Borrower's knowledge, following due and diligent inquiry, there are no actions, suits or proceedings pending, completed or threatened against or affecting Borrower or any person or entity owning an interest (directly or indirectly) in Borrower ("Interest Owner(s)") or any property of Borrower or any Interest Owner in any court or before any arbitrator of any kind or before or by any governmental authority (whether local, state, federal or foreign) that, individually or in the aggregate, could reasonably be expected by Len der to be material to the transaction contemplated hereby and (v) the Premises and the intended uses thereof are in compliance with all applicable laws, regulations and ordinances, including without limitation, the Americans with Disabilities Act of 1990 (42 U.S.C. §12101, et seq.), the Federal Architectural Barriers Act (42 U.S.C. §3601, et seq.), the Fair Housing Amendments Act of 1988 (42 U.S.C. §3601, et seq.), and the Rehabilitation Act of 1973 (29 U.S.C. §794) and any amendments, modifications or supplements thereto.

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O.

Borrower further represents and warrants that as of the date hereof and until the Indebtedness is paid in full

(a)

Borrower and each person or entity owning an interest in Borrower is not and will not be (i) identified on the Specially Designated Nationals and Blocked Persons List maintained by the Office of Foreign Assets Control, Department of the Treasury ("OFAC") and/or on any other similar list maintained by OFAC pursuant to any authorizing statute, executive order or regulation (collectively, the "List"), (ii) a person or entity with whom a citizen of the United States is prohibited to engage in transactions by any trade embargo, economic sanction, or other prohibition of United States law, regulation, or Executive Order of the President of the United States;

(b)

none of the funds or other assets of Borrower constitute or will constitute property of, or are or will be beneficially owned, directly or indirectly, by any Embargoed Person (as hereinafter defined);

(c)

no Embargoed Person has or will have any interest of any nature whatsoever in Borrower (whether directly or indirectly);

(d)

none of the funds of Borrower have been or will be derived from any unlawful activity with the result that the investment in Borrower is prohibited by law or that the Loan Documents are in or will be in violation of law,

(e)

Borrower has and will continue to implement procedures, and has consistently and will continue to consistently apply those procedures, to ensure the foregoing representations and warranties remain true and correct at all times.  The term "Embargoed Person" means any person, entity or government subject to trade restrictions under U.S. law, including but not limited to, the International Emergency Economic Powers Act, 50 U.S.C. §1701 et seq., The Trading with the Enemy Act, 50 U.S.C. App. 1 et seq., and any Executive Orders or regulations promulgated thereunder with the result that the investment in Borrower is prohibited by law or Borrower is in violation of law;

(f)

Borrower has complied and will continue to comply with all requirements of law relating to money laundering, anti-terrorism, trade embargos and economic sanctions, now or hereafter in effect;

(g)

Borrower has not and will not use funds from any "Prohibited Person" (as such term is defined in the September 24, 2001 Executive Order Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism) to make any payment due to Lender under the Loan Documents

6

Borrower will immediately notify Lender in writing if any of the representations, warranties or covenants are no longer true or have been breached or if Borrower has a reasonable basis to believe that they may no longer be true or have been breached.  In addition, Borrower will, at the request of Lender, provide such information as may be requested by Lender to determine Borrower's compliance with the terms hereof.

P.

Borrower further represents and warrants that as of the date hereof and until the Indebtedness is paid in full: (i) Borrower is not and will not be an "employee benefit plan" as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), which is subject to Title I of ERISA; (ii) the assets of Borrower do not and will not constitute "plan assets" of one or more such plans for purposes of Title I of ERISA; (iii) Borrower is not and will not be a "governmental plan" within the meaning of Section 3(32) of ERISA; (iv) transactions by or with Borrower are not and will not be subject to state statutes applicable to Borrower regulating investments of and fiduciary obligations with respect to governmental plans; (v) Borrower has made and will continue to make all required contributions to all employee benefit plans, if any, established for or on behalf of Borrower or to which Borrower is required to contribute; (vi) Borrower has and will continue to administer each such plan, if any, in accordance with its terms and the applicable provisions of ERISA and any other federal or state law; and (vii) Borrower has not and will not permit any liability under Sections 4201, 4243, 4062 or 4069 of Title IV of ERISA or taxes or penalties relating to any employee benefit plan or multi-employer plan to become delinquent or assessed, respectively, which would have a material adverse effect upon (i) the business or the financial position or results of operation of Borrower, (ii) the ability of Borrower to perform, or of Lender to enforce, any of the Loan Documents or Environmental Indemnity, or (iii) the value of the Premises.

BORROWER COVENANTS AND AGREES AS FOLLOWS:  

1.

Borrower shall

(a)

pay each item of Indebtedness secured by this Deed of Trust when due according to the terms of the Loan Documents;

(b)

pay a Late Charge on any payment of principal, interest, Make Whole Premium or Indebtedness which is not paid on or before the due date thereof to cover the expense involved in handling such late payment;

(c)

pay on or before the due date thereof any indebtedness permitted to be incurred by Borrower pursuant to the Loan Documents and any other claims which could become a lien on the Premises (unless otherwise specifically addressed in paragraph 1(e) hereof), and upon request of Lender exhibit satisfactory evidence of the discharge thereof;

(d)

complete within a reasonable time, the construction of any Improvements now or at any time in process of construction upon the Land;

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(e)

manage, operate and maintain the Premises and keep the Premises, including but not limited to, the Improvements, in good condition and repair and free from mechanics' liens or other liens or claims for liens, provided however, that Borrower may in good faith, with reasonable diligence and upon written Notice to Lender within thirty (30) days after Borrower has knowledge of such lien or claim, contest the validity or amount of any such lien or claim and defer payment and discharge thereof during the pendency of such contest in the manner provided by law, provided that (i) such contest may be made without the payment thereof; (ii) such contest shall prevent the sale or forfeiture of the Premises or any part thereof, or any interest therein, to satisfy such lien or claim; (iii) Borrower shall have obtained a bond over such lien or claim from a bonding company acceptable to Lender which has the effect of removing such lien or collection of the claim or lien so contested; and (iv) Borrower shall pay all costs and expenses incidental to such contest; and further provided, that in the event of a final, non-appealable ruling or adjudication adverse to Borrower, Borrower shall promptly pay such claim or lien, shall indemnify and hold Lender and the Premises harmless from any loss or damage arising from such contest and shall take whatever action necessary to prevent sale, forfeiture or any other loss or damage to the Premises or to the Lender;  

(f)

comply, and cause each lessee or other user of the Premises to comply, with all requirements of law and ordinance, and all rules and regulations, now or hereafter enacted, by authorities having jurisdiction of the Premises and the use thereof, including but not limited to all covenants, conditions and restrictions of record pertaining to the Premises, the Improvements, and the use thereof (collectively, "Legal Requirements");

(g)

subject to the provisions of paragraph 6 hereof, promptly repair, restore or rebuild any Improvements now or hereafter a part of the Premises which may become damaged or be destroyed by any cause whatsoever, so that upon completion of the repair, restoration and rebuilding of such Improvements, there will be no liens of any nature arising out of the construction and the Premises will be of substantially the same character and quality as it was prior to the damage or destruction;

(h)

if other than a natural person, do all things necessary to preserve and keep in full force and effect its existence, franchises, rights and privileges under the laws of the state of its formation and, if other than its state of formation, the state where the Premises is located.  Borrower shall notify Lender at least thirty (30) days prior to (i) any relocation of Borrower's principal place of business to a different state or any change in Borrower's

8

state of formation, and/or (ii) if Borrower is an individual, any relocation of Borrower's principal residence to a different state;

(i)

do all things necessary to preserve and keep in full force and effect Lender's title insurance coverage insuring the lien of this Deed of Trust as a first and prior lien, subject only to the Permitted Encumbrances stated in the title insurance policy issued to Lender and any other exceptions after the date of this Deed of Trust approved in writing by Lender, including without limitation, delivering to Lender not less than 30 days prior to the effective date of any rate adjustment, modification or extension of the Note or any other Loan Document, any new policy or endorsement which may be reasonably required to assure Lender of such continuing coverage;

(j)

execute any and all documents which may be required to perfect the security interest granted by this Deed of Trust; and

(k)

comply and cause the Premises and the intended uses thereof to comply with all laws, rules, and regulations affecting the Premises or any portion thereof or any use thereof and, upon request by Lender, provide Lender with such evidence as may be reasonably required by Lender to confirm such compliance, such evidence to include, without limitation, letters, licenses, permits, certificates and other correspondence from the appropriate governmental authorities, and opinions or certifications from architects or engineers.  The laws, regulations and ordinances with which compliance should be evidenced include, in addition to the foregoing and without limitation, the following:  building codes, health and environmental protection laws, erosion control ordinances, federal statutes, doing business and/or licensing laws and zoning laws (the evidence submitted as to zoning should include the zoning designation made for the Premises, the permitted uses of the Premises under such zoning designation and zoning requirements as to parking, lot size, ingress, egress and building setbacks).

(l)

in the event Permitted Transfer (viii) of paragraph 2(f) occurs, remain a Single-Asset Entity;  

As used herein, the term Single-Asset Entity means:

a corporation, limited or general partnership, limited liability company, or business trust which, at all times until the Indebtedness is paid in full (i) will not have any other assets other than the Premises, cash and marketable securities, and (ii) will not create, assume, incur, guarantee or become liable for debt, obligations, or performance of obligations for the benefit of any other person or entity except

9

for liabilities incurred in the normal operation of the Premises (other than liabilities secured by the Premises).

2.

Borrower shall not:

(a)

except as required by applicable Legal Requirements, construct any building or structure nor make any alteration or addition (other than normal repair and maintenance) to (i) the roof or any structural component of any Improvements on the Premises, or (ii) the building operating systems, including but not limited to, the mechanical, electrical, heating, cooling, or ventilation systems (other than replacement with equal or better quality and capacity), without the prior written consent of Lender not to be unreasonably withheld;

(b)

remove or demolish any material Improvements, or any portion thereof, which at any time constitutes a part of the Premises.

Notwithstanding anything hereinabove to the contrary, Borrower may construct, remove or demolish tenant improvements within the then existing building(s) or other structures to the extent such work is required solely under the terms of any Leases approved by Lender provided (i) no Event of Default exists under the Loan Documents; (ii) the work is completed on a timely basis, in a good, workmanlike, lien-free manner and in accordance with all Legal Requirements, and (iii) such work does not negatively affect the structural integrity of the Improvements or the value of the Premises;

(c)

cause or permit any change to be made in the general use of the Premises without Lender's prior written consent;

(d)

initiate any or acquiesce to a zoning reclassification or material change in zoning without Lender's prior written consent.  Borrower shall use all reasonable efforts to contest any such zoning reclassification or change;

(e)

make or permit any use of the Premises that could with the passage of time result in the creation of any right of use, or any claim of adverse possession or easement on, to or against any part of the Premises in favor of any person or entity or the public;

(f)

allow any of the following to occur (unless a Permitted Transfer):

(i)

a Transfer of all or any portion of the Premises or any interest in the Premises;

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(ii)

a Transfer of any ownership interest in Borrower or any entity which owns, directly or indirectly, an interest in Borrower at any level of the ownership structure; or

(iii)

in addition to (i) and (ii) above, if the Borrower is a trust, or if a trust owns an interest, directly or indirectly, in any entity which owns an interest in Borrower at any level of the ownership structure, the addition, deletion or substitution of a trustee of such trust.  

If any of such events occur, it shall be null and void and shall constitute an Event of Default under the Loan Documents.

It is understood and agreed that the Indebtedness evidenced by the Note is personal to Borrower and in accepting the same Lender has relied upon what it perceived as the willingness and ability of Borrower to perform its obligations under the Loan Documents and the Environmental Indemnity and as lessor under the Leases of the Premises.  Furthermore, Lender may consent to a Transfer and expressly waive Borrower's covenants contained in this paragraph 2(f), in writing to Borrower; however any such consent and waiver shall not constitute any consent or waiver of such covenants as to any Transfer other than that for which the consent and waiver was expressly granted.  Furthermore, Lender's willingness to consent to any Transfer and waive Borrower's covenants contained in this paragraph 2(f), implies no standard of reasonableness in determining whether or not such consent shall be granted and the same may be based upon what Lend er solely deems to be in its best interest.

For purposes of the Loan Documents, the following terms shall have the respective meanings set forth below:

"Transfer" or "Transferred" shall mean with respect to the Premises, an interest in the Premises, or an ownership interest or interest therein:

(i)

a sale, assignment, transfer, conveyance or other disposition (whether voluntary, involuntary or by operation of law);

(ii)

the creation, sufferance or granting of any lien, encumbrance, security interest or collateral assignment (whether voluntarily, involuntarily or by operation of law), other than the lien hereof, the leases of the Premises assigned to Lender, the Permitted Encumbrances and those liens which Borrower is contesting in accordance with the provisions of paragraph 1(e);

(iii)

the issuance or other creation of ownership interests in an entity;

11

(iv)

the reconstitution or conversion from one entity to another type of entity;

(v)

a merger, consolidation, reorganization or any other business combination; or

(vi)

a conversion to or operation of all or any portion of the Premises as a cooperative or condominium form of ownership.

"Permitted Transfer" shall mean:

(i)

a minor (as determined by Lender) conveyance of an interest in the Premises by Borrower, such as a utility easement, and for which Lender has given its prior written consent and imposed such conditions as Lender deems advisable and appropriate;

(ii)

a sale, assignment, transfer or conveyance of all or any portion of the Premises or an interest in the Premises for which Borrower has complied with all of the Property Transfer Requirements;

(iii)

any of the following Transfers for which Borrower has complied with all of the Ownership Transfer Requirements as applicable and Lender has given its prior written consent (and in connection with such consent, Lender may impose any conditions it wishes in its reasonable discretion);

(A)

a sale, assignment, transfer, or conveyance of an ownership interest or interest therein;

(B)

the issuance or other creation of ownership interests in an entity;

(C)

a reconstitution or conversion from one entity to another type of entity;

(D)

a merger, consolidation, reorganization or any other business combination;

(iv)

transfers of general partner interest in Borrower between VMS National Residential Portfolio I and VMS National Residential Portfolio II ("Borrower Interest Owners") for which Borrower has complied with all of the Specific Transfer Requirements I;

(v)

transfers of general partner interests in Borrower that represent less than 49%, individually or in the aggregate, of all ownership interests in Borrower to individuals or entities other than Borrower Interest Owners for which Borrower has complied with all of the Specific Transfer Requirements II;

(vi)

Borrower's right to obtain mezzanine financing for which Borrower has complied with all the Mezzanine Financing Requirements;

(vii)

any assumption of less than 100% of the limited partnership interests in Borrower Interest Owners by any affiliate of AIMCO REIT for which Borrower has complied with all of the Specific Transfer Requirements III;

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(viii)

conversion of the Borrower to a Single Asset Entity (as defined in paragraph 1(l)) wholly owned by AIMCO REIT and/or AIMCO OP and transfer of the Premises to said Single Asset Entity for which Borrower has complied with all of the Specific Transfer Requirements IV;

(ix)

a transfer of any general partnership interest in Borrower to a Qualified REIT Subsidiary, as defined in Section 856(i)(2) of the Internal Revenue Code of 1986, 100% owned by AIMCO REIT or to a Qualified REIT Subsidiary, as defined in Section 856(e)(1) of the Internal Revenue Code of 1986, 100% owned by AIMCO OP for which Borrower has complied with all of the Specific Transfer Requirements V;

(ix)

a transfer of shares of common stock, limited partnership interests or other beneficial or ownership interests or other forms of securities in AIMCO REIT or AIMCO OP (defined below), and the issuance of all varieties of convertible debt, equity and other similar securities of AIMCO REIT or AIMCO OP, and the subsequent transfer of such securities; provided, however, that no Change of Control (defined below) occurs as a result of such transfer, either upon such transfer or upon the subsequent conversion to equity of such convertible debt or other securities.

(x)

The issuance by AIMCO REIT or AIMCO OP of additional common stock, limited partnership interests or other beneficial or ownership interests, convertible debt, equity and other similar securities, and the subsequent transfer of such convertible debt or securities; provided, however, that no Change of Control occurs as the result of such transfer, either upon such transfer or upon the subsequent conversion to equity of such convertible debt or other securities.

(xi)

So long as AIMCO REIT owns 100% of the stock of AIMCO-LP, Inc. and AIMCO-GP, Inc. (and AIMCO-GP, Inc. remains the general partner of AIMCO OP), a transfer of limited partnership interests that results in AIMCO-LP, Inc. owning not less than 50.1% of the limited partnership interests in AIMCO OP.

For purposes of this Permitted Transfer Section, the following terms shall

be defined as follows:

(A)

"Change of Control" shall mean the earliest to occur of (1) the date an Acquiring Person becomes (by acquisition, consolidation, merger or otherwise), directly or indirectly, the beneficial owner of more than forty percent (40%) of the total Voting Equity Capital of AIMCO REIT then outstanding, or (2) the date on which AIMCO REIT shall

13

cease to hold (whether directly or indirectly through a wholly owned intermediary entity such as AIMCO-LP, Inc. or AIMCO-GP, Inc.) at least 50.1% of the limited partnership interests in AIMCO OP, or (3) the date on which AIMCO REIT shall cease for any reason to hold (whether directly or indirectly) (i) the interests in the Managing General Partner held as of the date of this Deed of Trust (as evidenced by organizational charts and documents submitted to Lender as of such date) and (ii) the Controlling Interest(s) in the Borrower, or (4) the replacement (other than solely by reason of retirement at age sixty-five or older, death or disability) of more than 50% (or such lesser percentage as is required for decision making by the board of directors of trustees, if applicable) of the members of the board of directors (or trustee, if applicable) of AIMCO REIT over a one-year period where such replacement shall not have been approved by a vote of at least a majority of the board of directors (or trustees, if applicable) of AIMCO REIT then still in office who either were members of such board of directors (or trustees, if applicable) at the beginning of such one year period or whose election as members of the board of directors (or trustees, if applicable) was previously so approved.

(B)

"Acquiring Person" shall mean a "person" or, group of "persons" within the meaning of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended. However, notwithstanding the foregoing, "Acquiring Person" shall not be deemed to include any member of the Borrower Control Group unless such member has, directly or indirectly, disposed of, sold or otherwise transferred to, or encumbered or restricted (whether by means of voting trust agreement or otherwise) for the benefit of an Acquiring Person, all or any portion of the Voting Equity Capital of AIMCO RElT directly or indirectly owned or controlled by such member or such member directly or indirectly votes all or any portion of the Voting Equity Capital of AIMCO REIT, directly or indirectly, owned or controlled by such member for the taking of any action which, directly or indirectly constitutes or would result in a Change of Cont rol, in which event such member of the Borrower Control Group shall be deemed to constitute an Acquiring Person to the extent of the Voting Equity Capital of AIMCO REIT owned or controlled by such member.

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(C)

"Borrower Control Group" shall mean a majority of the Board of Directors of AIMCO REIT.

(D)

A "Person" shall mean an individual, an estate, a trust, a corporation, a partnership, a limited liability company or any other organization or entity (whether governmental or private).

(E)

"Security" shall have the same meaning as in Section 2(1) of the Securities Act of 1933, as amended.

(F)

"Controlling Interest(s)" shall mean (i) with respect to a partnership, such majority and/or managing general partner interests which, together with a majority of limited partnership interests if necessary for consent purposes, vest in the holder of such interests the sale power, right and authority to control the day to day operations of the Borrower; including, without limitation, the authority to manage, operate and finance the Premises, (ii) with respect to a corporation, the number of shares which entitle the holder to elect a majority of the board of directors of the Borrower, and (iii) with respect to a limited liability company, such majority and/or managing member interests as vest in the holder of such interests the sole power, right and authority to control the day to day operations of the Borrower; including, without limitation, the authority to manage, operate and finance the Premises.

(G)

"AIMCO REIT" shall mean Apartment Investment and Management Company, a corporation organized and existing under the laws of the State of Maryland.

(H)

"AIMCO OP" shall mean AIMCO Properties, L.P., a limited partnership organized and existing under the laws of the State of Delaware.

(I)

"Managing General Partner" shall mean the entity executing this Deed of Trust on behalf of the Borrower and/or its successors or assigns in interest.

(J)

"Voting Equity Capital" shall mean securities of any class or classes, the holders of which are ordinarily, in the absence of contingencies, entitled to elect a majority of the

15

board of directors (or Persons performing similar functions).

"Property Transfer Requirements" are all of the following:

1.

Prior review and approval of the proposed purchaser or other transferee and the subject transaction by Lender, at Lender's reasonable discretion.  Review of the proposed purchaser or other transferee and the subject transaction shall encompass various factors, including, but not limited to, the proposed purchaser's or other transferee's creditworthiness, financial strength, and real estate management and leasing expertise as well as the proposed transaction's effect on the Premises, the Borrower, and other security for the Loan;

2.

Payment to Lender of an assumption fee equal to one percent (1%) of the principal balance of the Note; provided, however, that Lender will require up to $15,000.00 of such fee to be paid at the beginning of Lender's review process, and such sum shall be nonrefundable and earned upon receipt by Lender whether or not the transaction is ultimately completed or Lender ultimately approves the proposed purchaser or other transferee;

3.

Receipt, at Borrower's expense, of either (at Lender's discretion) a new ALTA standard loan policy or an endorsement updating the Lender's existing loan policy in the full amount of the Loan, in form and by an issuer satisfactory to Lender, and which insures this Deed of Trust to be a first and prior lien subject only to those exceptions which were previously approved by Lender and provides coverage against usury and mechanic's liens;

4.

Receipt by Lender of copies of all relevant information and documentation relating to or required by Lender in connection with the proposed transfer including but not limited to (a) the organizational documents of the proposed transferee and an opinion of counsel satisfactory to Lender as to its due formation, valid existence and authority to enter into and carry out the proposed transaction; (b) the deeds or other instruments of transfer and documents relating to the assignment and assumption of Leases; (c) evidence of compliance with the insurance requirements contained in the Loan Documents; and (d) compliance with such other closing requirements as are customarily imposed by Lender in connection with such transactions;

16

5.

Execution, delivery, acknowledgment and recordation, as applicable, of new, revised and/or replacement assumption agreements, loan modification agreements, indemnification agreements, escrow security or property reserves agreements, security instruments, financing statements, UCCs, new or revised letters of credit and/or guarantees in form and substance reasonably satisfactory to Lender;

6.

Payment of outside counsel fees and costs, other applicable professional's fees and costs, taxes, recording fees and the like, and any other fees and costs incurred; and

7.

Receipt by Lender of 60 days advance written notice of the proposed Transfer in question.

"Ownership Transfer Requirements" are all of the Property Transfer Requirements which Lender deems appropriate in its reasonable discretion, as well as a reasonable processing fee to be determined by Lender; provided, however, that (i) with respect to item 2 of the Property Transfer Requirements, the 1% fee shall be prorated (subject, however, to a $15,000 minimum) based on Lender's calculation of the effective percentage interest in Borrower transferred, and (ii) item 3 of the Property Transfer Requirements shall be required, at Lender's reasonable discretion, only in the event of (A) a merger, consolidation, reorganization or any other business combination, or (B) a reconstitution or conversion from one entity to another type of entity.

"Specific Transfer Requirements I" are all of the following:  

1.

AIMCO REIT (as defined below) and/or AIMCO OP (as defined below) (collectively) retain 20% indirect ownership interest in and retain management and control of Borrower and there is no change in the management and day-to-day operations at the Premises, unless otherwise approved by Lender;

2.

Lender receives notice of such transfer within thirty (30) days of the consummation of such transfer; and

3.

Lender receives an organizational chart for Borrower which includes ownership breakdowns for all entity levels and is certified by Borrower as true and correct.

Specific Transfer Requirements II are all of the following:

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1.

AIMCO REIT and/or AIMCO OP (collectively) retain 20% indirect ownership interest in and retain management and control of Borrower and there is no change in the management and day-to-day operations at the Premises, unless otherwise approved by Lender;

2.

Lender receives notice of such transfer within thirty (30) days of the consummation of such transfer along with the organizational documents of the transferee;

3.

At Lender's option, Lender receives an acceptable background and credit check, at Borrower's cost, for the proposed transferee if said proposed transferee's interest in Borrower will equal or exceed 20%;

4.

At Lender's option, Lender receives an acceptable OFAC report (research of the Office of Foreign Assets Control "Watched" companies list), at Borrower's cost;

5.

Lender receives an organizational chart for Borrower which includes ownership breakdowns for all entity levels and is certified by Borrower as true and correct; and

6.

Lender receives payment of an assumption fee equal to the greater of: (a) one-half percent (0.5%) of the outstanding principal balance of the Note prorated based on Lender's calculation of the effective percentage interest in Borrower transferred; or (b) $3,000.00.

Specific Transfer Requirements III are all of the following:

1.

AIMCO REIT and/or AIMCO OP (collectively) retain 20% indirect ownership interest in and retain management and control of Borrower and there is no change in the management and day-to-day operations at the Premises, unless otherwise approved by Lender;

2.

Lender receives notice of such transfer within thirty (30) days of the consummation of such transfer;

3.

Lender receives an organizational chart for Borrower which includes ownership breakdowns for all entity levels and is certified by Borrower as true and correct; and

4.

Lender receives a processing fee of $500.00.

Specific Transfer Requirements IV are all of the following:

1.

Property Transfer Requirements 3-7; and

2.

Lender receives a processing fee of $3,000.00.

Specific Transfer Requirements V are all of the following:

1.

AIMCO REIT and/or AIMCO OP (collectively) retain 20% indirect ownership interest in and retain management and control of

18

Borrower and there is no change in the management and day-to-day operations at the Premises, unless otherwise approved by Lender;

2.

Lender receives notice of such transfer within thirty (30) days of the consummation of such transfer along with the organizational documents of the transferee;

3.

At Lender's option, Lender receives an acceptable background and credit check, at Borrower's cost, for the proposed transferee if said proposed transferee's interest in Borrower will equal or exceed 20%;

4.

At Lender's option, Lender receives an acceptable OFAC report (research of the Office of Foreign Assets Control "Watched" companies list), at Borrower's cost;

5.

Lender receives an organizational chart for Borrower which includes ownership breakdowns for all entity levels and is certified by Borrower as true and correct; and

6.

Lender receives payment of a processing fee of $1,000.00.

"Mezzanine Financing Requirements" are all of the following:

(i)

no Event of Default has occurred under the Loan Documents;

(ii)

the mezzanine borrower may not be Borrower;

(iii)

the mezzanine debt is used solely to reimburse the mezzanine borrower for the costs associated with the repair and/or improvement of the Premises subject to the terms and conditions of the Loan Documents;

(iv)

the combined outstanding Indebtedness on the Loan and proposed mezzanine financing does not exceed eighty percent (80%) of the appraised value of the Premises as calculated by Lender at the time of funding of the mezzanine financing or at Lender's option as established by an appraisal of the Premises prepared by an MAI appraiser approved by Lender and in form and substance acceptable to Lender, which appraisal shall be paid for by Borrower;

(v)

a minimum of 1.05 debt service coverage, based on a 30-year amortization schedule, is maintained.  The debt service coverage shall be the annual net cash flow (annual net operating income after deduction for tenant improvements, leasing commissions, annual replacement reserves and a management fee) divided by the total annual installment payments due under the Note secured hereby and on any proposed mezzanine financing including accrued or capitalized interest.  Only net operating income from

19

approved executed leases in effect on the Premises with no uncured defaults shall be used in Lender's determination of the annual net cash flow;  

(vi)

the only security for the mezzanine financing is a pledge of ownership interests in Borrower or an owner of Borrower, directly or indirectly and such financing does not encumber nor result in any lien or charge upon or against the Premises or the Rents; and

(vii)

Lender's reasonable approval of the mezzanine lender as well as any successor or assign of mezzanine lender, any of which must be an institutional lender;

(viii)

Lender's reasonable approval of the mezzanine financing loan documents;

(ix)

Execution by the mezzanine lender of an inter-creditor agreement in form and substance acceptable to Lender;

(x)

neither Guarantor nor Borrower may be a guarantor of the mezzanine financing;

(xi)

at Lender's option, if required by the procedures promulgated by any rating agency(s) associated with a securitization transaction, evidence in writing to the effect that such mezzanine financing will not result in a re-qualification, reduction or withdrawal of any rating in effect immediately prior to the obtaining of the mezzanine financing issued in connection with the applicable securitization transaction;

(xii)

Borrower pays to Lender a reasonable fee for the handling and processing of such financing and reimburses Lender for all costs and expenses incurred by Lender, including but not limited to outside counsel fees and costs; and

(xiii)

the right to obtain mezzanine debt is personal to VMS National Properties and any successor borrower directly or indirectly wholly owned by AIMCO REIT and/or AIMCO OP and may not be exercised by any successor or assign of Borrower other than a successor borrower directly or indirectly wholly owned by AIMCO REIT and/or AIMCO OP.

(g)

allow all or any portion of the Premises to be operated as or converted to a cooperative or condominium form of ownership;

20

(h)

amend, alter, modify, terminate or assign that certain Property Management Agreement by and between Borrower, and NHPMN Management, LP dated January 1, 2003 as amended by Amendment of Management Agreement dated November 9, 2006, now in existence or any subsequent agreement hereafter entered into with respect to the Premises (the "Property Management Agreement");

(i)

permit the property and leasing manager to assign or sell the Property Management Agreement; or

(j)

replace the current property and leasing manager or Property Management Agreement without the prior consent of Lender.

3.

(a)

Borrower shall pay or cause to be paid when due and before any penalty attaches or interest accrues all general taxes, special taxes, assessments (including assessments for benefits from public works or improvements whenever begun or completed), utility charges, water charges, sewer service charges, common area maintenance charges, if any, vault or space charges and all other like charges against or affecting the Premises or against any property or equipment located on the Premises, or which might become a lien on the Premises, and shall, within 15 days following Lender's request, furnish to Lender a duplicate receipt of such payment.  If any such tax, assessment or charge may legally be paid in installments, Borrower may, at its option, pay such tax, assessment or charge in installments.  

(b)

If Borrower desires to contest any tax, assessment or charge relating to the Premises, Borrower may do so by paying the same in full, under protest, in the manner provided by law; provided, however, that

(i)

if contest of any tax, assessment or charge may be made without the payment thereof, and

(ii)

such contest shall have the effect of preventing the collection of the tax, assessment or charge so contested and the sale or forfeiture of the Premises or any part thereof or any interest therein to satisfy the same,

then Borrower may in its discretion and upon the giving of written notice to Lender of its intended action and upon the furnishing to Lender of such security or bond as Lender may require, contest any such tax, assessment or charge in good faith and in the manner provided by law.  All costs and expenses incidental to such contest shall be paid by Borrower.  In the

21

event of a ruling or adjudication adverse to Borrower, Borrower shall promptly pay such tax, assessment or charge.  Borrower shall indemnify and save harmless the Lender and the Premises from any loss or damage arising from any such contest and shall, if necessary to prevent sale, forfeiture or any other loss or damage to the Premises or to Lender, pay such tax, assessment or charge or take whatever action is necessary to prevent any sale, forfeiture or loss.  

4.

(a)

Borrower shall at all times keep or cause to be kept in force (i) property insurance insuring all Improvements which now are or hereafter become a part of the Premises for perils covered by a causes of loss-special form insurance policy, including coverage against terrorism and containing replacement cost, ordinance and law and agreed amount endorsements or equivalent coverage; (ii) commercial general liability insurance naming Lender as an additional insured protecting Borrower and Lender against liability for bodily injury or property damage occurring in, on or adjacent to the Premises, with a combined single limit of not less than One Million Dollars ($1,000,000) per occurrence with not less than a Two Million Dollar ($2,000,000) aggregate limit and excess umbrella liability insurance of not less than Fifteen Million Dollars ($15,000,000); (iii) boiler and machinery insurance if the property has a boiler or is an office building; (iv) rental value insurance for the perils specified herein for one hundred percent (100%) of the Rents (including operating expenses, real estate taxes, assessments and insurance costs which are lessee's liability) for a period of twelve (12) months; (v) builders risk insurance during all periods of construction; and (vi) insurance against all other hazards as may be reasonably required by Lender, including, without limitation, insurance against loss or damage by flood.

(b)

All insurance (including deductibles and exclusions) shall be in form, content and amounts reasonably approved by Lender and written by an insurance company or companies approved by Lender and rated A-, class size VIII or better in the most current issue of Best's Insurance Reports and which is licensed to do business in the state in which the Premises are located or a governmental agency or instrumentality approved by Lender.  The policies for such insurance shall have attached thereto standard mortgagee clauses in favor of and permitting Lender to collect any and all proceeds payable thereunder and shall include a 30 day (except for nonpayment of premium, in which case, a 10 day) notice of cancellation clause in favor of Lender.  All certificates of insurance (or duplicate originals of policies if requested by Lender) shall be delivered to and held by Lender as further security for the payment of the Note and any other ob ligations arising under the Loan Documents, with evidence of renewal coverage delivered to Lender at least 30 days before the expiration date of

22

any policy.  Borrower shall not carry or permit to be carried separate insurance, concurrent in kind or form and contributing in the event of loss, with any insurance required in the Loan Documents.

5.

(a)

Upon the occurrence of an Event of Default, Borrower shall deposit with and pay to Lender, on each payment date specified in the Note, sums calculated by Lender for payment of the following as they become due and payable:  (i) the estimated taxes and assessments assessed or levied against the Premises, and (ii) the estimated premiums for insurance required by the Loan Documents, excluding commercial general liability insurance.  Lender shall use such deposits to pay the taxes, assessments and premiums when the same become due.  Borrower shall procure and deliver to Lender, in advance, statements for such charges.  If the total payments made by Borrower under this paragraph exceed the amount of payments actually made by Lender for taxes, assessments and insurance premiums, such excess shall be credited by Lender on subsequent deposits to be made by Borrower.  If, however, the deposits are insufficient to pay t he taxes, assessments and insurance premiums when the same shall be due and payable, Borrower will pay to Lender any amount necessary to make up the deficiency, five (5) business days before the date when payment of such taxes, assessments and insurance premiums shall be due.  If at any time Borrower shall tender to Lender, in accordance with the provisions of the Note secured by this Deed of Trust, full payment of the entire Indebtedness represented thereby, Lender shall, in computing the amount of such Indebtedness, credit to the account of Borrower any balance remaining in the funds accumulated and held by Lender under the provisions of this paragraph.  If there is an Event of Default resulting in a public sale of the Premises, or if Lender otherwise acquires the Premises after an Event of Default, Lender shall apply, at the time of commencement of such proceedings, or at the time the Premises is otherwise acquired, the balance then remaining in the funds accumulated under this paragraph as a cr edit toward any delinquent or accrued taxes and then in such priority as Lender elects to the other Indebtedness.

(b)

Any funds held under this paragraph shall not constitute any deposit or account of the Borrower or moneys to which the Borrower is entitled upon demand, or upon the mere passage of time.  Lender shall not be required to segregate such deposits and may hold such deposits in its general account or any other account and may commingle such deposits with any other moneys of Lender or moneys which Lender is holding on behalf of any other person or entity.

6.

In the event of any damage to or destruction of the Premises, or any part thereof:

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(a)

Borrower will immediately notify Lender thereof in the manner provided in this Deed of Trust for the giving of notices.  Lender shall have the right (which may be waived by Lender in writing) to settle and adjust any claim under such insurance policies required to be maintained by Borrower.  In all circumstances, the proceeds thereof shall be paid to Lender and Lender is authorized to collect and to give receipts therefor.  Borrower agrees and acknowledges that such proceeds shall be held by Lender without any allowance of interest and that in any bankruptcy proceeding of Borrower, all such proceeds shall be deemed to be "Cash Collateral" as that term is defined in Section 363 of the Bankruptcy Code.  Provided that no Event of Default exists, Borrower shall have the right to participate in any settlement or adjustment; provided, however, that any settlement or adjustment where the aggregate amount of suc h proceeds equals or exceeds $500,000 shall be subject to the written approval of Lender, not to be unreasonably withheld.

(b)

Such proceeds, after deducting therefrom any reasonable expenses incurred by Lender in the collection thereof (including but not limited to reasonable attorneys' fees and costs), shall be applied by Lender to pay the Indebtedness secured hereby including, but not limited to the Make Whole Premium, whether or not then due and payable, provided, however, that if no Event of Default exists at the time of such application or the application occurs during the Open Period, no Make Whole Premium shall be due.

Notwithstanding anything hereinabove to the contrary,

(i)

in the event the casualty occurs more than three (3) months prior to the Maturity Date and no Event of Default exists, Lender shall apply such proceeds as follows outlined below; provided, further, that Lender's rights in this subparagraph are subject to Borrower's rights to use such proceeds for rebuilding and restoring the buildings and improvements as may be required or permitted by law in effect at the time of the loss:

(A)

If the aggregate amount of such proceeds is less than $500,000, Lender shall pay such proceeds directly to Borrower, to be held in trust for Lender and applied to the cost of rebuilding and restoring the Premises.

(B)

If the aggregate amount of such proceeds equals or exceeds $500,000 Lender shall disburse such amounts of the proceeds as Lender reasonably deems necessary for the repair or replacement of the Premises, subject to the conditions set forth in 6(c) below.

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(ii)

in the event (x) an Event of Default exists, or (y) the casualty occurs during the last three (3) months prior to the Maturity Date and Lender determines that the repair and restoration of such casualty cannot be completed prior to the Maturity Date, or (z) the conditions set forth in 6(c) are not met, then Lender, in its sole and absolute discretion may either:

(A)

declare the entire Indebtedness to be immediately due and payable, provided, however, that if no Event of Default exists or the loan term is in the Open Period, no Make Whole Premium shall be due.  All proceeds shall be applied toward payment of the Indebtedness in such priority as Lender elects; or

(B)

disburse such proceeds as Lender reasonably deems necessary for the repair or replacement of the Premises subject to those conditions set forth in 6(c) which Lender in its sole and absolute discretion may require.

(c)

(i)

In the event that Borrower is to be reimbursed out of the insurance proceeds or out of any award or payment received with respect to a Taking, Lender shall from time to time make available such proceeds, subject to the following conditions: (a) there continues to exist no Event of Default; (b) the delivery to Lender of satisfactory evidence of the estimated cost of completion of such repair and restoration work and any architect's certificates, waivers of lien, contractor's sworn statements, and other evidence of cost and of payment and of the continued priority of the lien hereof over any potential liens of mechanics and materialmen (including, without limitation, title policy endorsements) as Lender may reasonably require and approve; (c) the time required to complete the repair and restoration work and for the income from the Premises to return to the level it was prior to the loss will not exceed the coverage period of the rental value insurance required hereunder; (d) the annual net operating income shall equal or exceed 1.20 times the annual debt service on the Note.  Only net operating income from approved executed Leases in effect on the Premises, with no uncured defaults, shall be used in Lender's determination of the annual net operating income; (e) Lender approves the plans and specifications of such work before such work is commenced if the estimated cost of rebuilding and restoration exceeds 25% of the Indebtedness or involves any structural changes or modifications, which approval shall not be unreasonably withheld; (f) if the

25

amount of any insurance proceeds, award or other payment is insufficient to cover the cost of restoring and rebuilding the Premises, Borrower shall pay such cost in excess of such proceeds, award or other payment before being entitled to reimbursement out of such funds; (g) Borrower pays to Lender a non-refundable processing fee equal to the greater of $5,000.00 or .25% of the amount of such proceeds within sixty (60) days of the occurrence of any such damage or destruction and before Lender disburses any proceeds; and (h) such other conditions to such disbursements, in Lender's reasonable discretion, as would be customarily required by a construction lender doing business in the area where the Premises is located or which are otherwise required by any rating agency rating a securitization transaction with respect to the Loan.

(ii)

No payment made by Lender prior to the final completion of the repair or restoration work shall, together with all payments theretofore made, exceed 90% of the cost of such work performed to the time of payment, and at all times the undisbursed balance of said proceeds shall be at least sufficient to pay for the cost of completion of such work free and clear of all liens.  Any proceeds remaining after payment of the cost of rebuilding and restoration shall be paid to Borrower so long as no Event of Default has occurred and is continuing.

(iii)

Repair and restoration of the Premises shall be commenced promptly after the occurrence of the loss and shall be prosecuted to completion diligently, and the Premises shall be so restored and rebuilt to substantially the same character and quality as prior to such damage and destruction and shall comply with all Legal Requirements.

(d)

Should such damage or destruction occur after foreclosure or sale proceedings have been instituted, the proceeds of any such insurance policy or policies, if not applied in rebuilding or restoration of the Improvements, shall be used to pay (i) the Indebtedness then due and owing in the event of a non-judicial sale in such priority as Lender elects, or (ii) the amount due in accordance with any decree of foreclosure or deficiency judgment that may be entered in connection with such proceedings, and the balance, if any, shall be paid to the owner of the equity of redemption if it shall then be entitled to the same, or otherwise as any court having jurisdiction may direct.

7.

In the event of the commencement of a Taking affecting the Premises:

26

(a)

Borrower shall notify Lender thereof in the manner provided in this Deed of Trust for the giving of notices.  Lender may participate in such proceeding, and Borrower shall deliver to Lender all documents requested by it to permit such participation.

(b)

Borrower shall cause the proceeds of any award or other payment made relating to a Taking, to be paid directly to Lender.  Lender, in its sole and absolute discretion: (i) may apply all such proceeds to pay the Indebtedness in such priority as Lender elects, provided however, that if no Event of Default exists at the time of such application no Make Whole Premium shall be due; or (ii) subject to and in accordance with the provisions set forth in paragraph 6(c) above, may disburse such amounts of the proceeds as Lender reasonably deems necessary for the repair or replacement of the Premises.

Notwithstanding anything herein above to the contrary, provided no Event of Default exists, Lender agrees to disburse the proceeds received from any Inconsequential Taking, as hereinafter defined, to Borrower for the repair and/or replacement of the Premises.  An Inconsequential Taking shall be a Taking which (i) results in less than $100,000 in proceeds; (ii) does not, in Lender's determination, materially or adversely affect the Improvements, parking, access, ingress, egress or use of the Premises; and (iii) does not trigger any rights or options of tenants under the Leases.   

8.

If by the laws of the United States of America or of any state or governmental subdivision having jurisdiction over Borrower or of the Premises or of the Loan evidenced by the Loan Documents or any amendments or modifications thereof, any tax or fee is due or becomes due or is imposed upon Lender in respect of the issuance of the Note hereby secured or the making, recording and registration of this Deed of Trust or otherwise in connection with the Loan Documents, the Environmental Indemnity or the Loan, except for Lender's income or franchise tax, Borrower covenants and agrees to pay such tax or fee in the manner required by such law, and to hold harmless and indemnify Trustee and Lender, their successors and assigns, against any liability incurred by reason of the imposition of any such tax or fee.  

9.

(a)

Upon the occurrence of any Event of Default, Lender may, but need not, make any payment or perform any act herein required of Borrower, in any form and manner deemed expedient and may, but need not, make full or partial payments of principal or interest on prior encumbrances, if any, and purchase, discharge, compromise or settle any tax lien or other prior lien or title or claim thereof, or redeem from any tax sale or forfeiture affecting said Premises, or contest any tax or assessment.  All moneys paid for any of the purposes herein authorized and all reasonable expenses paid or

27

incurred in connection therewith, including but not limited to, reasonable attorneys' fees and costs and reasonable attorneys' fees and costs on appeal, and any other money advanced by Lender to protect the Premises and the lien hereof, shall be so much additional Indebtedness secured hereby and shall become immediately due and payable without notice and with interest thereon at the Default Rate from the date of expenditure or advance until paid.  

(b)

In making any payment hereby authorized relating to taxes or assessments or for the purchase, discharge, compromise or settlement of any prior lien, Lender may make such payment according to any bill, statement or estimate secured from the appropriate public office without inquiry into the accuracy thereof or into the validity of any tax, assessment, sale, forfeiture, tax lien or title or claim thereof or without inquiry as to the validity or amount of any claim for lien which may be asserted.  

10.

If one or more of the following events (herein called an "Event of Default" or "Events of Default" as the context so requires) shall have occurred:  

(a)

failure to pay when due any principal, interest, Make Whole Premium or other Indebtedness, utilities, taxes or assessments or insurance premiums required pursuant to the Loan Documents or the Environmental Indemnity, and such failure shall have continued for 5 days; or

(b)

Borrower, Interest Owner or any guarantor voluntarily brings or acquiesces to any of the following:  (A) any action for dissolution, act of dissolution or dissolution or the like of Borrower, Interest Owner or any guarantor under the Federal Bankruptcy Code as now or hereafter constituted; (B) the filing of a petition or answer proposing the adjudication of Borrower, Interest Owner or any guarantor as a bankrupt or its reorganization or arrangement, or any composition, readjustment, liquidation, dissolution or similar relief with respect to it pursuant to any present or future federal or state bankruptcy or similar law; or (C) the appointment by order of a court of competent jurisdiction of a receiver, trustee or liquidator of the Premises or any part thereof or of Borrower, Interest Owner or any guarantor or of substantially all of the assets of Borrower, Interest Owner or any guarantor; or

(c)

one or more of the items set forth in paragraph 10(b) above occur which were either not (i) voluntarily brought by Borrower, Interest Owner or any guarantor or (ii) acquiesced in by Borrower, Interest Owner or any guarantor, and which are not discharged or dismissed within 90 days after the action, filing or appointment, as the case may be; or

28

With respect to the matters in (b) and (c) above for an Interest Owner only, no Event of Default shall occur until an interested party or Interest Owner asserts a claim or right against Borrower or the Premises which delays or otherwise affects Lender's rights, remedies, or interests granted under the Loan Documents (whether or not such assertion is successful).

(d)

with respect to the matters not described in the other subparagraphs of this paragraph 10, failure to duly observe or perform any covenant, condition or agreement of the Borrower or any guarantor contained in this Deed of Trust, the Guaranty, the Note or the Assignment of Leases from Borrower to Lender or in any other instrument or agreement which evidences or secures the Loan (the "Loan Documents"), but excluding the Environmental Indemnity or in the Environmental Indemnity, and such failure shall have continued for 30 days after Notice specifying such failure is given by Lender to Borrower; or

If any failure to observe or perform under (d) above shall be of such nature that it cannot be cured or remedied within 30 days, Borrower shall be entitled to a reasonable period of time to cure or remedy such failure (not to exceed 90 days following the giving of Notice), provided Borrower commences the cure or remedy thereof within the 30 day period following the giving of Notice and thereafter proceeds with diligence, as determined by Lender, to complete such cure or remedy.  

With respect to the matters in (d), no Event of Default shall occur if the failure to observe or perform will not have a Material Adverse Effect as such term is defined below.

"Material Adverse Effect" means a material adverse effect upon (i) the business or the financial position or results of operation of Borrower, (ii) the ability of Borrower to perform, or of Lender to enforce, any of the Loan Documents or Environmental Indemnity or (iii) the value of (x) the Collateral taken as a whole or (y) the Premises.

(e)

the failure of Borrower to duly observe or perform any of the covenants, conditions and agreements of the Borrower contained in paragraph 2(f) of this Deed of Trust and to cure such failure within ten (10) days following Borrower’s receipt of Notice of such failure; provided, however, that Borrower shall only be granted said 10 day cure period if the failure to observe or perform is a curable event and the granting of said cure period will not have a Material Adverse Effect; or

(f)

any representation when made by or on behalf of Borrower, Interest Owner or any guarantor regarding the Premises, the making or delivery of any of

29

the Loan Documents or the Environmental Indemnity or in any material written information provided by or on behalf of Borrower, Interest Owner or any guarantor in connection with the Loan shall prove to be untrue or inaccurate in any material respect; or

(g)

the failure of Borrower to give Notice to Lender within 90 days after the death of any individual who is personally liable for any obligation under the Loan Documents or the Environmental Indemnity, as Borrower, indemnitor or guarantor, whether or not such individual had executed the Note or this Deed of Trust; or

(h)

subject to the provisions of paragraph 2(f), the failure of Borrower to provide Lender with an assumption agreement in form and substance and executed by a person(s) or entity(ies) acceptable to Lender in its sole discretion to assume the obligations of any deceased individual who is personally liable for any obligation under the Loan Documents or the Environmental Indemnity, as Borrower, indemnitor or guarantor, whether or not such individual had executed the Note or this Deed of Trust, and such failure shall have continued for 90 days after the death of such individual;

(i)

all or any portion of the Premises is operated as or converted to a cooperative or condominium form of ownership; or

then, in each and every such case, the whole of said principal sum hereby secured shall, at the option of the Lender and without further notice to Borrower, become immediately due and payable together with accrued interest thereon, a Make Whole Premium calculated in accordance with the provisions of the Loan Documents and all other Indebtedness, and whether or not Lender has exercised said option, interest shall accrue on the entire principal balance and any interest or Make Whole Premium or other Indebtedness then due, at the Default Rate until fully paid or if Lender has not exercised said option, for the duration of any Event of Default.  

11.

Borrower agrees that if Lender accelerates the whole or any part of the principal sum hereby secured after the occurrence of an Event of Default but outside of the Open Periods, that Borrower shall pay as yield maintenance protection and not as a penalty, a "Make Whole Premium", as defined in the Note.

12.

(a)

Upon the occurrence of any Event of Default, in addition to any other rights or remedies provided in the Loan Documents, at law, in equity or otherwise, Lender shall have the right to cause the Premises or any part thereof to be sold in order to accomplish the object of these trusts and

30

upon demand by Lender, Trustee, without demand on Borrower, shall sell the Premises or such part thereof as Trustee in its sole discretion may deem necessary to accomplish the objects of these trusts having first given notice of the time and place of such sale as required by law for the sale of real property upon execution.

(b)

Trustee may postpone such sale from time to time by giving notice of such postponement in the same manner in which any original notice of sale was given or by an announcement or proclamation made to the persons assembled at the time and place previously appointed and noticed for such sale or postponed sale, and on the date of such sale or the date to which such sale may have been postponed Trustee may sell the Premises to the highest bidder.  Lender or its agents may bid and purchase at such sale.  Trustee in conducting said sale may act either in person or through the agency of an auctioneer and may establish as one of the conditions of such sale that all bids and payments for said Premises be made in cash.

13.

Upon such sale, Trustee shall make, execute, and after due payment is made, deliver to the purchaser or purchasers a deed or deeds for the Premises or part thereof sold and shall apply the proceeds of the sale, at the election of Lender first, to all of the expenses of such sale including the reasonable expenses of this trust or the Trustee and the fees and costs of any attorneys for this trust, environmental audits, the Trustee or Lender, all of which shall accrue and become due from and after any Event of Default, together with any sums which Trustee or Lender shall have paid for procuring any abstract, certificate or report of title to the Premises and, second, to principal, interest and any other Indebtedness and all other sums or amounts due under the Note or agreed or provided to be paid by Borrower herein or in any other Loan Documents, all in such order as Lender may determine.  The remainder of such proceeds, if any, sha ll be paid to Borrower or Borrower's successors or assigns, as their rights may appear.  

14.

In the event of such a sale of the Premises or any part thereof and the execution of a deed or deeds therefor under these trusts, any recital therein of the occurrence of an Event of Default or of the giving or recording of any notice or demand by Trustee or Lender regarding such sale shall be conclusive proof thereof, and the receipt of the purchase money recited therein shall fully discharge the purchaser from any obligation for the proper application of the proceeds of sale in accordance with these trusts.

15.

Following the occurrence of an Event of Default, unless the same has been specifically waived in writing, Borrower shall forthwith upon demand of Trustee or Lender surrender to Lender possession of the Premises, and Lender shall be entitled to take actual possession of the Premises or any part thereof personally or by its agents or attorneys, and Lender in its discretion may, with or without force

31

and with or without process of law, enter upon and take and maintain possession of all or any part of the Premises together with all documents, books, records, papers and accounts of the Borrower or the then owner of the Premises relating thereto, and may exclude Borrower, its agents or assigns wholly therefrom, and may as attorney-in-fact or agent of the Borrower, or in its own name as Lender and under the powers herein granted:

(a)

hold, operate, maintain, repair, rebuild, replace, alter, improve, manage or control the Premises as it deems judicious, insure and reinsure the same and any risks related to Lender's possession, operation and management thereof and receive all Rents, either personally or by its agents, and with full power to use such measures, legal or equitable, as in its discretion it deems proper or necessary to enforce the payment or security of the Rents, including actions for the recovery of Rent, actions in forcible detainer and actions in distress for Rents, hereby granting full power and authority to exercise each and every of the rights, privileges and powers herein granted at any and all times hereafter, without notice to Borrower; and

(b)

conduct leasing activity pursuant to the provisions of the Assignment of Leases.

Neither Trustee nor Lender shall be obligated to perform or discharge, nor does either hereby undertake to perform or discharge, any obligation, duty or liability under any Lease.  Except to the extent that the same is caused solely by Lender's gross negligence or willful misconduct, should Trustee or Lender incur any liability, loss or damage under any Leases, or under or by reason of the Assignment of Leases, or in the defense of any claims or demands whatsoever which may be asserted against Lender or Trustee by reason of any alleged obligations or undertakings on its part to perform or discharge any of the terms, covenants or agreements in any Lease, the amount thereof, including costs, expenses and reasonable attorneys' fees and costs, including reasonable attorneys' fees and costs on appeal, shall be added to the Indebtedness and secured hereby.

16.

Upon the occurrence of an Event of Default, Trustee and Lender in the exercise of the rights and powers conferred upon them shall have the full power to use and apply the Rents, less costs and expenses of collection to the payment of or on account of the items listed in (a) - (c) below, at the election of Lender and in such order as Lender may determine as follows:

(a)

to the payment of (i) the expenses of operating and maintaining the Premises, including, but not limited to the cost of management, leasing (which shall include reasonable compensation to Trustee, Lender and their respective agent or agents if management and/or leasing is delegated to an agent or agents), repairing, rebuilding, replacing, altering and improving

32

the Premises, (ii) premiums on insurance as hereinabove authorized, (iii) taxes and special assessments now due or which may hereafter become due on the Premises, and (iv) expenses of placing the Premises in such condition as will, in the sole judgment of Lender, make it readily rentable;

(b)

to the payment of any principal, interest or any other Indebtedness secured hereby or any deficiency which may result from any foreclosure sale;

(c)

to the payment of established claims for damages, if any, reasonable attorneys' fees and costs and reasonable attorneys' fees and costs on appeal.

The manner of the application of Rents, the reasonableness of the costs and charges to which such Rents are applied and the item or items which shall be credited thereby shall be within the sole and unlimited discretion of Lender.  To the extent that the costs and expenses in (a) and (c) above exceed the amounts collected, the excess shall be added to the Indebtedness and secured hereby.

17.

Upon the occurrence of any Event of Default, unless the same has been specifically waived in writing, Lender may apply to any court having jurisdiction for the appointment of a receiver of the Premises.  Such appointment may be made either before or after sale, without notice, without regard to the solvency or insolvency of Borrower at the time of application for such receiver and without regard to the then value of the Premises or the adequacy of Lender's security.  Lender may be appointed as such receiver.  The receiver shall have power to collect the Rents during the pendency of any foreclosure proceedings and, in case of a sale, during the full statutory period of redemption, if any, as well as during any further times when Borrower, except for the intervention of such receiver, would be entitled to collect such Rents.  In addition, the receiver shall have all other powers which shall be necessary or are usual in such cases for the protection, possession, control, management and operation of the Premises during the whole of said period.  The court from time to time may authorize the receiver to apply the net income in its possession at Lender's election and in such order as Lender may determine in payment in full or in part of those items listed in paragraph 16.

18.

(a)

Borrower agrees that all reasonable costs, charges and expenses, including but not limited to, reasonable attorneys' fees and costs, incurred or expended by Trustee or Lender arising out of or in connection with any action, proceeding or hearing, legal, equitable or quasi-legal, including the preparation therefor and any appeal therefrom, in any way affecting or pertaining to the Loan Documents, the Environmental Indemnity, or the Premises, shall be promptly paid by Borrower.  All such sums not promptly paid by Borrower shall bear interest at the Default Rate from the date of such advance and shall be due and payable on demand and, except

33

for sums relating to the Environmental Indemnity, shall be added to the Indebtedness secured hereby.

(b)

Borrower hereby agrees that upon the occurrence of an Event of Default and the acceleration of the principal sum secured hereby pursuant to this Deed of Trust, to the full extent that such rights can be lawfully waived, Borrower hereby waives and agrees not to insist upon, plead, or in any manner take advantage of, any notice of acceleration, any stay, extension, exemption, homestead, marshaling or moratorium law or any law providing for the valuation or appraisement of all or any part of the Premises prior to any sale or sales thereof under any provision of this Deed of Trust or before or after any decree, judgment or order of any court or confirmation thereof, or claim or exercise any right to redeem all or any part of the Premises so sold and hereby expressly waives to the full extent permitted by applicable law on behalf of itself and each and every person or entity acquiring any right, title or interest in or to all or any part of the Premises, all benefit and advantage of any such laws which would otherwise be available to Borrower or any such person or entity, and agrees that neither Borrower nor any such person or entity will invoke or utilize any such law to otherwise hinder, delay or impede the exercise of any remedy granted or delegated to Lender herein but will permit the exercise of such remedy as though any such laws had not been enacted.  Borrower hereby further expressly waives to the full extent permitted by applicable law on behalf of itself and each and every person or entity acquiring any right, title or interest in or to all or any part of the Premises any and all rights of redemption from any sale or any order or decree of foreclosure obtained pursuant to provisions of this Deed of Trust.

19.

In accordance with and subject to the terms and conditions of the Assignment of Leases, Borrower hereby assigns to Lender directly and absolutely, and not merely collaterally, the interest of Borrower as lessor under the Leases of the Premises, and the Rents payable under any Lease and/or with respect to the use of the Premises, or portion thereof, including any oil, gas or mineral lease, or any installments of money payable pursuant to any agreement or any sale of the Premises or any part thereof, subject only to a license, if any, granted by Lender to Borrower with respect thereto prior to the occurrence of an Event of Default.  Borrower has executed and delivered the Assignment of Leases which grants to Lender specific rights and remedies in respect of said Leases and governs the collection of Rents thereunder and from the use of the Premises, and such rights and remedies so granted shall be cumulative of those granted herein.  

The collection of such Rents and the application thereof as aforesaid shall not cure or waive any Event of Default or notice of default hereunder or invalidate any act done pursuant to such notice, except to the extent any such Event of Default is

34

fully cured.  Failure or discontinuance of Lender at any time, or from time to time, to collect any such moneys shall not impair in any manner the subsequent enforcement by Lender of the right, power and authority herein conferred on Lender.  Nothing contained herein, including the exercise of any right, power or authority herein granted to Lender, shall be, or be construed to be, an affirmation by Lender of any tenancy, Lease or option, or right to possession otherwise, or an assumption of liability under, or the subordination of the lien or charge of this Deed of Trust to any such tenancy, Lease or option or right to possession otherwise.  Borrower hereby agrees that, in the event Lender exercises its rights as provided for in this paragraph or in the Assignment of Leases, Borrower waives any right to compensation for the use of Borrower's furniture, furnishings or equipment in the Premises for the period such assignm ent of rents or receivership is in effect, it being understood that the Rents derived from the use of any such items shall be applied to Borrower's obligations hereunder as above provided.  

20.

All rights and remedies granted to Trustee or Lender in the Loan Documents shall be in addition to and not in limitation of any rights and remedies to which it is entitled in equity, at law or by statute, and the invalidity of any right or remedy herein provided by reason of its conflict with applicable law or statute shall not affect any other valid right or remedy afforded to Trustee or Lender.  No waiver of any default or Event of Default under any of the Loan Documents shall at any time thereafter be held to be a waiver of any rights of the Trustee or Lender hereunder, nor shall any waiver of a prior Event of Default or default operate to waive any subsequent Event of Default or default.  All remedies provided for in the Loan Documents are cumulative and may, at the election of Lender, be exercised alternatively, successively or concurrently.  No act of Trustee or Lender shall be construed as an election to proceed under any one provision herein to the exclusion of any other provision or to proceed against one portion of the Premises to the exclusion of any other portion.  Time is of the essence under this Deed of Trust and the Loan Documents.

21.

By accepting payment of any sum secured hereby after its due date, Lender does not waive its right either to require prompt payment when due of all other sums or installments so secured or to declare a default for failure to pay such other sums or installments.

22.

The usury provisions of paragraph 6 of the Note and the liability provisions of paragraph 9 of the Note are fully incorporated herein by reference as if the same were specifically stated here.

23.

In the event one or more provisions of the Loan Documents shall be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision hereof, and the Loan

35

Documents shall be construed as if any such provision had never been contained herein.  

24.

If the payment of the Indebtedness secured hereby or of any part thereof shall be extended or varied, or if any part of the security be released, all persons now or at any time hereafter liable therefor, or interested in said Premises, shall be held to assent to such extension, variation or release, and their liability and the lien and all provisions hereof shall continue in full force, the right of recourse against all such persons being expressly reserved by Lender notwithstanding such variation or release.  

25.

Upon payment in full of the principal sum, interest and other Indebtedness secured by the Loan Documents, these presents shall be null and void, and Trustee shall release this Deed of Trust and the lien hereof by proper instrument executed in recordable form.  

26.

(a)

Borrower hereby grants to Lender and its respective agents, attorneys, employees, consultants, contractors and assigns an irrevocable license and authorization to enter upon and inspect the Premises and all facilities located thereon at reasonable times.

(b)

In connection with any sale or conveyance of this Deed of Trust, Borrower grants to Lender and its respective agents, attorneys, employees, consultants, contractors and assigns an irrevocable license and authorization to conduct, at Lender's expense, a Phase I environmental audit of the Premises.

(c)

In the event there has been an Event of Default or in the event Lender has formed a reasonable belief, based on its inspection of the Premises or other factors known to it, that Hazardous Materials may be present on the Premises, then Borrower grants to Lender and its respective agents, attorneys, employees, consultants, contractors and assigns an irrevocable license and authorization to conduct environmental tests of the Premises, including without limitation, a Phase I environmental audit, subsurface testing, soil and ground water testing, and other tests which may physically invade the Premises or facilities (the "Tests").  The scope of the Tests shall be such as Lender, in its sole but reasonable discretion, determines is necessary to (i) investigate the condition of the Premises, (ii) protect the security interests created under this Deed of Trust, or (iii) determine compliance with Environmental Laws, the provisions of the Loan Documents and the Environmental Indemnity and other matters relating thereto.  Borrower shall pay the reasonable costs of the Tests and upon Borrower’s request, Lender will make available to Borrower the result of the Tests.

36

(d)

Provided no Event of Default has occurred, Lender will provide Borrower with reasonable notice of Lender's intent to enter, inspect and conduct the Tests provided for in this paragraph.  In addition, Lender shall conduct such inspections and Tests during normal business hours and use reasonable efforts to minimize disruption of lessees' business operations.

The foregoing licenses and authorizations are intended to be a means of protection of Lender's security interest in the Premises and not as participation in the management of the Premises.

27.

Within 15 days after any written request by any party to this Deed of Trust, the requested party shall certify, by a written statement duly acknowledged, the amount of principal, interest and other Indebtedness then owing on the Note, the terms of payment, Maturity Date and the date to which interest has been paid.  Borrower shall further certify whether any defaults, offsets or defenses exist against the Indebtedness secured hereby.  

28.

(a)

Borrower shall furnish to Lender within 120 days after the end of each fiscal year of Borrower, a statement of income and expenses for Borrower’s operation of the Premises for that fiscal year, a statement of changes in financial position of Borrower relating to the Premises for that fiscal year and, when requested by Lender, a balance sheet showing all assets and liabilities of Borrower relating to the Premises as of the end of that fiscal year;

(b)

Borrower shall furnish to Lender within 120 days after the end of each fiscal year of Borrower, and at any other time upon Lender’s request, a rent schedule for the Premises showing the name of each tenant, and for each tenant, the space occupied, the lease expiration date, the rent payable for the current month, the date through which rent has been paid, and any related information requested by Lender;

(c)

Borrower shall furnish to Lender within 120 days after the end of each fiscal year of Borrower, and at any other time upon Lender’s request, an accounting of all security deposits held pursuant to all Leases, including the name of the institution (if any) and the names and identification numbers of the accounts (if any) in which such security deposits are held and the name of the person to contact at such financial institution, along with any authority or release necessary for Lender to access information regarding such accounts;

(d)

upon Lender’s request, a balance sheet, a statement of income and expenses for Borrower, a statement of changes in financial position of

37

Borrower for Borrower’s most recent fiscal year, an aged account receivables report and an annual budget; and

(e)

if required by Lender, a statement of income and expense for the Premises for the prior month or quarter.

(f)

Each of the statements, schedules and reports required by Section 28 shall be certified to be complete and accurate by an individual having authority to bind Borrower, and shall be in such form and contain such detail as Lender may reasonably required.  If an Event of Default has occurred and is continuing, Lender may require that the financial statements required by Sections 28(a), 28(b) and 28(c) be audited, but may not require that any other financial statements required by Section 28 be audited.  Certification of a statement by the chief financial officer of the entity that is the subject of the statement or, in the case of a partnership, the chief financial officer of the general partner, will be acceptable to Lender as certification by an individual having authority to bind Borrower.

29.

Each notice, consent, request, report or other communication under this Deed of Trust or any other Loan Document (each a "Notice") which any party hereto may desire or be required to give to the other shall be deemed to be an adequate and sufficient notice if given in writing and service is made by either (i) registered or certified mail, postage prepaid, in which case notice shall be deemed to have been received three (3) business days following deposit to U.S. mail; or (ii) nationally recognized overnight air courier, next day delivery, prepaid, in which case such notice shall be deemed to have been received one (1) business day following delivery to such nationally recognized overnight air courier.  All Notices shall be addressed to Borrower at its address given on the first page hereof, or to Lender at c/o Principal Real Estate Investors, LLC, 801 Grand Avenue, Des Moines, Iowa 50392-1450, Attn:  Commerc ial Real Estate Servicing, Loan No. 755501, or to such other place as any party may by written notice to the other parties hereafter designate as a place for service of notice.  Borrower shall not be permitted to designate more than one place for service of Notice concurrently.

30.

Lender, from time to time, may substitute another Trustee in place of the Trustee named herein, to execute the trusts hereby created; and upon such appointment, and without conveyance to the successor trustee, the successor trustee shall be vested with all the title, interest, powers, duties and trusts in the Premises hereby vested in or conferred upon Trustee herein named.  Each such appointment and substitution shall be made by written instrument executed by the Lender containing reference to this Deed of Trust sufficient to identify it, which instrument, when recorded in the office of the County Recorder of the county or counties in which the Premises is situated, shall be conclusive proof of proper appointment of the successor trustee.  The recital or statement, in any instrument

38

executed by Trustee in pursuance of any of said trusts, of the due authorization of any agent of the Trustee executing the same shall for all purposes be conclusive proof of such authorization.  

31.

Trustee at any time, at Trustee's option, may commence and maintain suit in any court of competent jurisdiction and obtain the aid and direction of said court in the execution by it of the trusts or any of them, herein expressed or contained, and, in such suit, may obtain the orders or decrees, interlocutory or final of said court directing the execution of said trusts, and confirming and approving Trustee's acts, or any of them, or any sales or conveyances made by Trustee, and adjudging the validity thereof, and directing that the purchasers of the property sold and conveyed be let into immediate possession thereof, and providing for orders of court or other process requiring the Sheriff of the county in which said property is situated to place and maintain said purchasers in quiet and peaceable possession of the property so purchased by them, and the whole thereof.  

32.

Borrower has had the opportunity to fully negotiate the terms hereof and modify the draftsmanship of the Loan Documents and the Environmental Indemnity.  Therefore, the terms of the Loan Documents and the Environmental Indemnity shall be construed and interpreted without any presumption, inference, or rule requiring construction or interpretation of any provision of the Loan Documents and the Environmental Indemnity against the interest of the party causing the Loan Documents and the Environmental Indemnity or any portion of it to be drafted.  Borrower is entering into the Loan Documents and the Environmental Indemnity freely and voluntarily without any duress, economic or otherwise.

33.

Borrower, forthwith upon request, at any and all times hereafter, at the expense of Borrower, will cause to be made, executed, acknowledged and delivered to Trustee, any and every deed or assurance in law which Trustee or counsel of Trustee shall reasonably advise or require for the more sure, effectual and satisfactory granting and confirming of said Premises unto Trustee.  

34.

Trustee shall not be liable or responsible for its acts or omissions hereunder, except for Trustee's own gross negligence or willful default, or be liable or responsible for any acts or omissions of any agent, attorneys or employee by him employed hereunder, if selected with reasonable care.  

35.

Trustee accepts this trust when this Deed of Trust executed and acknowledged is made a public record as provided by law.  Trustee is not obligated to notify any party hereto of pending sale under any other deed of trust or of any action or proceeding in which Borrower, Lender, or Trustee shall be a party unless brought by Trustee.  

39

36.

This Deed of Trust and all provisions hereof shall inure to the benefit of the heirs, successors and assigns of Lender and shall bind the heirs and permitted successors and assigns of Borrower.  

37.

This Deed of Trust shall be governed by, and construed in accordance with, the laws of the state of California, without regard to its conflicts of law principles.

38.

As used herein, the term "Default Rate" means a rate equal to the lesser of (i) four percent (4%) per annum above the then applicable interest rate payable under the Note or (ii) the maximum rate allowed by applicable law.

39.

BORROWER AND LENDER EACH KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE, TO THE EXTENT PERMITTED BY LAW, TRIAL BY JURY IN ANY ACTIONS BROUGHT BY BORROWER, TRUSTEE OR LENDER IN CONNECTION WITH THIS DEED OF TRUST, ANY OF THE LOAN DOCUMENTS, THE INDEBTEDNESS SECURED HEREBY, OR ANY OTHER STATEMENTS OR ACTIONS OF LENDER.

40.

This Deed of Trust and the Indebtedness secured hereby is for the sole purpose of conducting or acquiring a lawful business, professional or commercial activity or for the acquisition or management of real or personal property as a commercial investment, and all proceeds of such Indebtedness shall be used for said business or commercial investment purpose.  Such proceeds will not be used for the purchase of any security within the meaning of the Securities Exchange Act of 1934, as amended, or any regulation issued pursuant thereto, including without limitation, Regulations U, T and X of the Board of Governors of the Federal Reserve System.  This is not a purchase money deed of trust where a seller is providing financing to a buyer for the payment of all or any portion of the purchase price, and the Premises secured hereby is not a residence or homestead or used for mining, grazing, agricultural, timber or farming purposes.

41.

Unless Lender shall otherwise direct in writing, Borrower shall appear in and defend all actions or proceedings purporting to affect the security hereunder, or any right or power of the Lender.  The Lender shall have the right to appear in such actions or proceedings.  Borrower shall save Lender harmless from all reasonable costs and expenses, including but not limited to, reasonable attorneys' fees and costs, and costs of a title search, continuation of abstract and preparation of survey incurred by reason of any action, suit, proceeding, hearing, motion or application before any court or administrative body in and to which Lender may be or become a party by reason hereof.  Such proceedings shall include but not be limited to condemnation, bankruptcy, probate and administration proceedings, as well as any other action, suit, proceeding, right, motion or application wherein proof of claim is by law required to be filed or in which it becomes necessary to defend or uphold the terms of this Deed of Trust or the Loan Documents or

40

otherwise purporting to affect the security hereof or the rights or powers of Lender.  All money paid or expended by Lender in that regard, together with interest thereon from date of such payment at the applicable interest rate shall be additional Indebtedness secured hereby and shall be immediately due and payable by Borrower without notice.

42.

Upon the occurrence of an Event of Default, unless the same has been specifically waived in writing, all Rents collected or received by Borrower shall be accepted and held for Lender in trust and shall not be commingled with the funds and property of Borrower, but shall be promptly paid over to Lender.

43.

If more than one, all obligations and agreements of Borrower are joint and several.

44.

This Deed of Trust may be executed in counterparts, each of which shall be deemed an original; and such counterparts when taken together shall constitute but one agreement.

45.

Borrower shall pay Lender for every Lender statement furnished at Borrower's request the maximum fee allowed by law pursuant to Section 2943 of the Civil Code of California and all amendments thereto, the provisions of which are incorporated herein by reference and made a part hereof.  Such fee shall be computed as of the time said statement is furnished.

46.

Borrower hereby irrevocably authorizes Lender to apply any and all amounts received by Lender in repayment of amounts due under the Loan Documents first to amounts which are not guaranteed pursuant to the terms of any guaranty and then to amounts which are guaranteed pursuant to the terms of any guaranty.  Borrower hereby waives any and all rights it has or may have under Section 2822 of the California Civil Code which provides that if a guarantor is "liable upon only a portion of an obligation and the principal provides partial satisfaction of the obligation, the principal may designate the portion of the obligation that is to be satisfied."

47.

Notwithstanding anything to the contrary set forth herein or in any of the Loan Documents, this Deed of Trust shall not secure the following obligations (the "Unsecured Obligations"):  (i) any obligations evidenced by or arising under the Environmental Indemnity; and (ii) any other obligations in this Deed of Trust or in any of the other Loan Documents to the extent that such other obligations relate specifically to the presence on the Premises of Hazardous Materials and are the same or have the same effect as any of the obligations evidenced by or arising under the Environmental Indemnity (excluding the cost of any Tests incurred by Lender hereunder).  Any breach or default with respect to the Unsecured Obligations after the expiration of any applicable cure periods shall constitute an

41

Event of Default hereunder, notwithstanding the fact that such Unsecured Obligations are not secured by this Deed of Trust.

48.

Borrower desires and intends that this Deed of Trust also constitute a fixture filing between Borrower as debtor and Lender as secured party, as defined in the Uniform Commercial Code.  To this end, Borrower acknowledges that (i) this Deed of Trust covers goods which are or are to become fixtures on the Land; (ii) this financing statement is to be recorded; (iii) Borrower is the record owner of such property; and (iv) products of collateral are also covered.  No financing statement in favor of any secured party other than Lender covering the personal property described herein or any portion thereof is on file in any public office.

49.

Borrower acknowledges and agrees that the Condominium Declarations and Bylaws recorded at Instrument No. 82-352982 and the Condominium Plan recorded at Instrument No. 82-352983, and all of the terms, conditions and rights of the parties thereunder, are hereby made subject and subordinate to the rights of the Lender under the Loan Documents, including any amendments, supplements, modifications, renewals or replacements thereof.

(Signatures on next page)

42

IN WITNESS WHEREOF, Borrower has caused this Deed of Trust to be duly executed and delivered as of the date first above written.   

VMS NATIONAL PROPERTIES, an Illinois general partnership

By:

VMS NATIONAL RESIDENTIAL PORTFOLIO I, an Illinois limited partnership

By:

MAERIL, INC., a Delaware

                        corporation, its general partner

       By: /s/Patti K. Fielding

       Name:  Patti K. Fielding

                Title:  Executive Vice President  

                           and Treasurer

By:

VMS NATIONAL RESIDENTIAL PORTFOLIO II, an Illinois limited partnership

By:

MAERIL, INC., a Delaware

                        corporation, its general partner

       By: /s/Patti K. Fielding

       Name:  Patti K. Fielding

                Title:  Executive Vice President  

                           and Treasurer

43

EX-10

EXHIBIT 10.29

GUARANTY

755501

THIS GUARANTY (as the same may from time to time hereafter be modified, supplemented or amended, the "Guaranty") is made as of January 19, 2007, by AIMCO PROPERTIES, L.P., a Delaware limited partnership, having an office at Stanford Place 3, 4582 South Ulster Street Parkway, Suite 1100, Denver, Colorado 80237 ("Guarantor"), in favor of PRINCIPAL LIFE INSURANCE COMPANY, an Iowa corporation ("Lender").

RECITALS:

Lender has agreed to make a loan (the "Loan") in the original principal sum of Thirteen Million Three Hundred Thousand and 00/100 Dollars ($13,300,000.00) (the "Loan Amount") to VMS NATIONAL PROPERTIES, an Illinois general partnership ("Borrower"); and

The Loan is evidenced by Borrower's secured promissory note made payable and delivered to Lender (as the same may from time to time hereafter be modified, amended, supplemented, extended or consolidated in writing, and any note(s) issued in exchange therefor or replacement thereof, the "Note") and further evidenced and secured by a "Mortgage" (it being agreed that "Mortgage" as hereinafter used shall be construed to mean "mortgage" or "deed of trust" or "trust deed" or "deed to secure debt" as the context so requires) on certain real estate located in Los Angeles County, California, together with all existing improvements constructed thereon, said Premises being more particularly described in said Mortgage, and an Assignment of Leases ("Assignment of Leases"); and

In connection with the Loan, the Borrower has also executed that certain Environmental Indemnity ("Environmental Indemnity") for the benefit of Lender (the Note, Environmental Indemnity, Mortgage and Assignment of Leases and all other instruments or agreements by which the Loan is evidenced or secured are hereinafter collectively referred to as the "Underlying Instruments"); and

It is a condition of Lender's agreement to make the Loan that Guarantor be unconditionally liable for and personally guarantee the payment and performance of certain liabilities and obligations of the Borrower under the Underlying Instruments upon the terms and conditions as are hereinafter set forth and except for such liabilities and obligations described herein, Guarantor shall have no liability in connection with, or responsibility to perform, under or in accordance with the Underlying Instruments; and

WHEREAS, Guarantor is financially interested in Borrower and is materially benefited by the consummation of the Loan and has agreed to unconditionally and personally guarantee the payment and performance of certain liabilities and obligations of Borrower under the Underlying Instruments upon the terms and conditions as are hereinafter set forth.

-2-

NOW, THEREFORE, in order to induce Lender to make the Loan to Borrower, Guarantor intending to be legally bound, hereby makes the following representations and warranties to the Lender and hereby covenants and agrees with the Lender as follows:

1.

Guarantor absolutely, irrevocably and unconditionally guarantees to the Lender payment and the full, faithful and timely performance of any and all liabilities and obligations of Borrower whether now existing or hereafter incurred under the Environmental Indemnity and paragraph 9 of the Note (all of which payments, liabilities and obligations are hereinafter collectively referred to as the "Guaranteed Obligations").

2.

Guarantor absolutely, irrevocably and unconditionally waives notice of acceptance of this Guaranty and notice of any payment, liability or obligation to which it may apply, and waives presentment, demand of payment, protest, notice of dishonor or nonpayment of such liabilities under this Guaranty or any of the Underlying Instruments creating the Guaranteed Obligations and any suit or taking other action by the Lender against, and any other notice to, any party liable thereon or any property which may be security therefor.

3.

The Lender may at any time and from time to time without the consent of, or notice to, Guarantor, without incurring any responsibility to Guarantor and without impairing or releasing any of the obligations of Guarantor hereunder, upon or without any terms or conditions and in whole or in part:

(a)

renew, alter or change the interest rate, manner, time, place or terms of payment or performance of any of the Guaranteed Obligations, or any liability incurred directly or indirectly in respect thereof, whereupon the guaranty herein made shall apply to the Guaranteed Obligations as so changed, extended, renewed or altered;

(b)

sell, exchange, release, surrender, and in any manner and in any order realize upon or otherwise deal with any property at any time directly and absolutely assigned or pledged or mortgaged to secure the Guaranteed Obligations or any liabilities (including any of those hereunder) incurred directly or indirectly in respect thereof;

(c)

exercise or refrain from exercising any rights against Borrower or any other person (including Guarantor) or otherwise act or refrain from acting with regard to the Underlying Instruments, Guaranteed Obligations or this Guaranty;

(d)

settle or compromise any of the Guaranteed Obligations, any security therefor or any liability (including any of those hereunder) incurred directly or indirectly in respect thereof or hereof, and/or subordinate the payment of all or any part thereof to the payment of any liability of Borrower (whether or not then due) to creditors of Borrower other than the Lender and Guarantor;

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(e)

apply any sums in whatever manner paid or realized to any liability or liabilities of Borrower to the Lender regardless of what liability or liabilities of Borrower remain unpaid;

(f)

consent to or waive any breach of or any act, omission or default under the Underlying Instruments or otherwise amend, modify or supplement any of such instruments or agreements; and/or

(g)

sell, convey or assign, whether into a securitized transaction or otherwise, all or any part of Lender's interest in this Guaranty and the Underlying Instruments.

4.

(a)

No invalidity, irregularity or unenforceability of all or any part of the Underlying Instruments, the Guaranteed Obligations or this Guaranty, or of any security therefor, shall affect, impair or constitute a defense to this Guaranty.  This Guaranty is a direct and primary obligation of Guarantor, and Guarantor's obligations hereunder are not as a surety.  This is a guaranty of payment and performance, and not merely a guaranty of collection.

(b)

Guarantor acknowledges and agrees that this Guaranty and Guarantor's obligations with respect to payments and performance under the Environmental Indemnity shall remain in full force and effect, notwithstanding the fact that the Note and payments due under the other Underlying Instruments have been paid in full.  The Guarantor’s obligations with respect to payments and performance under paragraph 9 of the Note shall remain in full force and effect until the liabilities and obligations of Borrower under paragraph 9 of the Note have been paid and performed in full.

5.

(a)

Notwithstanding any payment or payments made by Guarantor hereunder, Guarantor will not assert or exercise any right of the Lender or of such Guarantor against Borrower to recover the amount of any payment made by such Guarantor to the Lender by way of subrogation, reimbursement, contribution, indemnity or otherwise arising by contract or operation of law, and Guarantor shall not have any right of recourse to or any claim against assets or property of Borrower, whether or not the obligations of Borrower have been satisfied, all of such rights being herein expressly waived by Guarantor.  The provisions of this paragraph shall survive the termination of this Guaranty, and any satisfaction and discharge of Borrower by virtue of any payment, court order or any applicable law.

(b)

Notwithstanding the provisions of Section 5(a), Guarantor shall have and be entitled to all rights of subrogation otherwise provided by applicable law in respect of any payment Guarantor may make or be obligated to make under this Guaranty, and to assert and enforce the same, in each case on and after, but at no

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time prior to, the date (the "Subrogation Trigger Date") which is 91 days after the date on which all obligations under the Underlying Instruments shall have been paid or performed in full, if and only if the existence of Guarantor's rights under this Section 5(b) would not make Guarantor a creditor (as defined in the Bankruptcy Reform Act of 1978, an amended, 11 U.S.C. Sections 101 et seq., and the regulations adopted and promulgated pursuant thereto) of Borrower in any insolvency bankruptcy, reorganization or similar proceeding commenced on or prior to the Subrogation Trigger Date.

(c)

In the event that Guarantor shall advance or become obligated to pay any sums with respect to any obligation hereby guaranteed or in the event that for any reason whatsoever the Borrower or any subsequent owner of the collateral securing the Loan is now, or shall hereafter become, indebted to Guarantor, Guarantor agrees that the amount of such sums and of such Indebtedness together with all interest thereon, shall at all times be subordinate as to the lien, time of payment and in all other respects, to all sums, including principal, interest and other Indebtedness, at any time owing to the Lender under any of the Underlying Instruments.  Nothing herein contained is intended or shall be construed to give to Guarantor any right to participate in any way in the right, title or interest of the Lender in or to the collateral securing the Loan, notwithstanding any payments made by Guarantor under this Guaranty, all such rights of parti cipation being hereby expressly waived and released.

(d)

Guarantor waives all rights and defenses arising out of an election of remedies by the creditor, even though that election of remedies, such as a nonjudicial foreclosure with respect to security for a guaranteed obligation, has destroyed the guarantor's rights of subrogation and reimbursement against the principal by the operation of Section 580d of the Code of Civil Procedure or otherwise.

(e)

Guarantor waives any rights Guarantor might have pursuant to the terms of Sections of the California Civil Code or Code of Civil Procedure including without limitation the following: (i) Guarantor waives the benefit of any statute of limitations affecting Guarantor's liability hereunder or the enforcement thereof, including, without limitation all rights and benefits, if any, arising under Section 359.5 of the California Code of Civil Procedure; (ii) Guarantor hereby waives, to the fullest extent permitted by law, all rights and benefits under Section 2809 of the California Civil Code purporting to reduce a guarantor's obligations in proportion to the principal obligation, all rights and benefits under Section 580a of the California Code of Civil Procedure purporting to limit the amount of any deficiency judgment which might be recoverable following the occurrence of a trustee's sale under the Deed of Trust, all rights and benefits un der Section 580b of the California Code of Civil Procedure stating that no deficiency may be recovered on a real property purchase money obligation and all rights and benefits

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under Section 580d of the California Code of Civil Procedure stating that no deficiency may be recovered on a note secured by a deed of trust on real property in case such real property is sold under the power of sale contained in such deed of trust, to the extent any such sections have any application hereto or any application to Guarantor; (iii) Guarantor waives all rights and defenses that the Guarantor may have because the Borrower's debt is secured by real property.  This means, among other things:  (1) Lender may collect from the Guarantor without first foreclosing on any real or personal property collateral pledged by the Borrower, (2) if Lender forecloses on any real property collateral pledged by the Borrower:  (A) the amount of debt may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than th e sale price, (B) Lender may collect from the Guarantor even if Lender, by foreclosing on the real property collateral, has destroyed any right the Guarantor may have to collect from Borrower.  This is an unconditional and irrevocable waiver of any rights and defenses the Guarantor may have because Borrower's debt is secured by real property.  These rights and defenses include, but are not limited to, any rights or defenses based upon Section 580a, 580b, 580d, or 726 of the Code of Civil Procedure; (iv) without limiting the generality of the foregoing or any other provision hereof, the Guarantor waives all rights and benefits which might otherwise be available to the Guarantor under Division Third, Part 4, Title XII of the California Civil Code.

6.

Guarantor agrees that to the extent that Borrower makes a payment or payments to Lender, which payment or payments or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required, for any of the foregoing reasons or for any other reasons, to be repaid or paid over to a custodian, trustee, receiver or any other party under any bankruptcy act, state or federal law, common law or equitable cause, then to the extent of such payment or repayment, the obligation or part thereof intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made.

7.

Guarantor makes the following representations and warranties which shall survive the execution and delivery of this Guaranty:

(a)

Guarantor is and, until the Indebtedness is paid in full, will continue to (i) be a duly organized and validly existing entity in good standing under the laws of the state of its formation, (ii) be duly qualified as a foreign entity in each jurisdiction in which the nature of its business makes such qualification necessary or desirable, (iii) have the requisite power and authority to carry on its business as now being conducted, (iv) have the requisite power to execute, deliver and perform its obligations under this Guaranty, and (v) comply with the provisions of all of its organizational documents, and the Legal Requirements of the state of its formation.

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(b)

The execution, delivery and performance of this Guaranty (i) are within the applicable powers of Guarantor; (ii) have been authorized by all requisite action; (iii) have received all necessary approvals and consents, corporate, governmental or otherwise; (iv) does not and will not violate, conflict with, result in a breach of or constitute (with notice or lapse of time, or both) a default under any provision of law, any order or judgment of any court or governmental authority, the articles of incorporation, by-laws, partnership, operating or trust agreement, or other governing instrument of Guarantor, or any indenture, agreement or other instrument to which Guarantor is a party or by which Guarantor or any of Guarantor's assets is or may be bound or affected; (v) does not and will not result in the creation or imposition of any lien, charge or encumbrance whatsoever upon any of Guarantor's assets; and (vi) does not and will not requir e any authorization or license from, or any filing with, any governmental authority or other body.

(c)

This Guaranty constitutes the legal, valid and binding obligations of Guarantor, enforceable against Guarantor in accordance with its terms, except as may be limited by (i) bankruptcy, insolvency, reorganization or other similar laws affecting the rights of creditors generally, and (ii) general principles of equity (regardless of whether considered in a proceeding in equity or at law).

8.

Guarantor and Borrower are separate and distinct entities with no identity of interest with respect to any Indebtedness which may become owed or any payments which may be made hereunder.  Borrower is not contractually bound to Guarantor with respect to any payments hereafter made under this Guaranty in any manner which would have the effect of imputing the liability of Guarantor hereunder to Borrower.

9.

Guarantor is related and/or affiliated with Borrower, has personal knowledge of and is familiar with Borrower's business affairs, books and records and has the ability to influence Borrower's financial decisions.  Guarantor represents that Borrower is in sound financial condition as of the date of this Guaranty.

10.

Nothing herein contained shall in any manner affect the lien or priority of the Mortgage, and upon the occurrence of an Event of a Default, the Lender may invoke any remedies it may have under the Underlying Instruments, or this Guaranty, either concurrently or successively and the exercise of any one or more of such remedies shall not be deemed an exhaustion of such remedy or remedies or a waiver of any other remedy or remedies and shall not be deemed an election of remedies.  Guarantor hereby specifically waives any defense to its performance under this Guaranty based upon an election of remedies by Lender, including but not limited to an election to foreclose by nonjudicial sale under any deed of trust or security agreement and pursue any other remedy which destroys, lessens or otherwise affects Guarantor's subrogation rights and/or its rights to reimbursement from or to proceed against Borrower or any other person, when resul ting from the judicial

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or nonjudicial foreclosure (under any deed of trust or security agreement) or the selling or otherwise disposing of or collecting or applying any property, real or personal, securing the Note, or otherwise.  The exercise by the Lender of any such remedies shall not release or discharge Guarantor from its obligations hereunder unless and until the full amount of the Indebtedness evidenced by the Note and secured as aforesaid has been fully paid and satisfied, and any such release or discharge shall be subject to the provisions of paragraph 4(b) hereof.

11.

This Guaranty shall remain in full force and effect until all obligations of the Borrower under the Underlying Instruments have been satisfied in full and are no longer subject to disgorgement under any applicable state or federal creditor rights or bankruptcy laws.  No delay on the part of the Lender in exercising any options, powers or rights, or the partial or single exercise thereof, shall constitute a waiver thereof.  No waiver of any rights hereunder, and no modification or amendment of this Guaranty, shall be deemed to be made by either party unless the same shall be in writing, duly signed on behalf of such party, and each such waiver (if any) shall apply only with respect to the specific instance involved and shall in no way impair the rights of such party or the obligations of Guarantor to the Lender in any other respect at any other time.  This Guaranty and the rights and obligations of the Lender and of Guar antor hereunder shall be governed and construed in accordance with the laws of the state of California, without regard to its conflicts of law principles and this Guaranty is binding upon Guarantor, Guarantor's heirs, personal representatives and permitted successors or assigns, and shall inure to the benefit of the Lender and its successors or assigns.

12.

Guarantor acknowledges that copies of the Underlying Instruments have been made available to Guarantor and that Guarantor is familiar with their contents.  Guarantor affirmatively agrees that upon any Permitted Transfer effected in accordance with the provisions of the Underlying Instruments or any transfer by Lender of all or any portion of its interest in the Loan, it shall not be necessary for Guarantor to reaffirm its continuing obligations under this Guaranty, but Guarantor will do so upon request by Lender.

13.

GUARANTOR AND LENDER EACH KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE, TO THE EXTENT PERMITTED BY LAW, TRIAL BY JURY IN ANY ACTIONS BROUGHT BY GUARANTOR OR LENDER IN CONNECTION WITH THIS GUARANTY, ANY OF THE LOAN DOCUMENTS, THE INDEBTEDNESS SECURED HEREBY, OR ANY OTHER STATEMENTS OR ACTIONS OF LENDER.

14.

Each notice, consent, request or other communication under this Guaranty (each a "Notice") which any party hereto may desire or be required to give to the other shall be deemed to be adequate and sufficient notice if given in writing and service is made by either (i) registered or certified mail, postage prepaid, in which case such notice shall be deemed to have been received three (3) business days following deposit to U.S. mail; or

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(ii) nationally recognized overnight air courier, next day delivery, prepaid, in which case such notice shall be deemed to have been received one (1) business day following delivery to such nationally recognized overnight air courier.  All Notices shall be addressed to Guarantor at its address given on the first page hereof, or to Lender at c/o Principal Real Estate Investors, LLC, 801 Grand Avenue, Des Moines, Iowa 50392-1450, Attn: Commercial Real Estate Servicing, Loan No.755501, or to such other place as any party may by notice in writing to the other parties designate as a place for service of notice.

15.

Each Guarantor (if more than one) whose signature appears below shall be deemed to be bound by the provisions of this Guaranty and the Guaranteed Obligations, whether each signature was affixed at the same or different times, and the term "Guarantor" as used herein shall be deemed to refer to each individually, as well as collectively, and each of the undersigned shall be jointly and severally liable for the Guaranteed Obligations hereunder, both personally and with recourse, irrespective of the recourse or non-recourse nature of the Underlying Instruments.  Guarantor agrees that if this Guaranty is placed in the hands of an attorney for enforcement, Guarantor will reimburse Lender all expenses incurred, including attorney's fees.

16.

This Guaranty may be executed in counterparts, each of which shall be deemed an original; and such counterparts when taken together shall constitute but one agreement.

17.

Capitalized terms used herein and not otherwise defined shall have the meanings given to them in the Underlying Instruments.

18.

Guarantor hereby irrevocably authorizes Lender to apply any and all amounts received by Lender in repayment of the Loan first to amounts which are not guaranteed pursuant to the terms of any guaranty and then to amounts which are guaranteed pursuant to the terms of any guaranty.  Guarantor hereby waives any and all rights it has or may have under Section 2822 of the California Civil Code which provides that if a guarantor is "liable upon only a portion of an obligation and the principal provides partial satisfaction of the obligation, the principal may designate the portion of the obligation that is to be satisfied."

19.

In the case of a power of sale foreclosure under the Mortgage, the fair market value of the real property collateral shall be conclusively deemed to be the amount of the successful bid at the foreclosure sale.  Guarantor waives any rights or benefits it may now or hereafter have to a fair value hearing under Section 580a of the California Code of Civil Procedure.  Lender shall have absolutely no obligation to make a bid at any foreclosure sale, but rather may make no bid or bid any amount which Lender, in its sole discretion, deems appropriate.

(Signatures on next page)

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IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be duly executed and delivered as of the date first set forth above.

GUARANTOR:

AIMCO PROPERTIES, L.P., a Delaware limited partnership

By:      AIMCO-GP, Inc., a Delaware   

            corporation, its general partner

            By: /s/Patti K. Fielding

       Name:  Patti K. Fielding

       Title:  Executive Vice President  

                              and Treasurer

EX-10

Exhibit 10.30

PROPERTY RESERVES AGREEMENT

755501

THIS PROPERTY RESERVES AGREEMENT (as the same may from time to time hereafter be modified, supplemented or amended, this "Agreement") is made as of January 19, 2007 by VMS NATIONAL PROPERTIES, an Illinois general partnership ("Borrower"), and PRINCIPAL LIFE INSURANCE COMPANY, an Iowa corporation ("Lender").

RECITALS

Lender has agreed to make a loan (the "Loan") in the original principal amount of Thirteen Million Three Hundred and 00/100 Dollars ($13,300,000.00) (the "Loan Amount") to Borrower as set forth in the Loan Documents, executed by and between Lender and Borrower; and

The Loan is evidenced by Borrower's Secured Promissory Note made payable and delivered to Lender (as may be modified, amended, supplemented, extended or consolidated in writing, and any note(s) issued in exchange therefor or in replacement thereof, the "Note") and further evidenced and secured by, among other things, a "Mortgage" (it being agreed that Mortgage as hereinafter used shall be construed to mean "mortgage" or "deed of trust" or "trust deed" or "deed to secure debt" as the context so requires) on certain real estate, together with all existing improvements constructed thereon, said Premises being more particularly described in said Mortgage.

NOW THEREFORE, in consideration of the making of the Loan, the mutual promises and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Lender and Borrower, intending to be legally bound, agree as follows:

1.

Property Reserves.

Borrower has agreed to deposit with Lender a letter of credit(s) (if more than one, collectively if the context so requires the "Letter of Credit") as detailed below to be held by Lender to reimburse Borrower for the costs of certain capital improvements to the Premises as described in Schedule 1 hereto and such other capital improvements to the Premises that Lender determines, in its sole discretion, provide a material benefit/improvement to the Premises upon completion thereof  (i.e. roof replacement/repair, new decks, rehabilitation of individual units) ("Capital Improvements").  The Letter of Credit and any renewal or replacement thereof and any proceeds therefrom shall be held by Lender as additional security for the Loan and are hereafter referred to as the "Property Reserves".  The term "Escrow Release" as used herein shall refer to a disb ursement of funds and/or a reduction of a Letter of Credit as applicable.

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a.

On the Closing Date, Borrower shall deliver an acceptable Letter of Credit in the amount of $299,299.00 to cover the cost of Capital Improvements.

2.

Borrower shall deliver to Lender not later than 30 days prior to the expiration date of any Letter of Credit and any renewal or replacement Letter of Credit, a renewal or replacement unconditional, irrevocable bank Letter of Credit identical in terms and amount and issued by a United States bank acceptable to Lender.  If Borrower shall fail to deliver any renewal or replacement Letter of Credit in accordance with the foregoing requirements, Lender may, in its discretion, draw upon any Letter of Credit then in its possession and hold such proceeds in accordance with the terms hereof.

Lender reserves the right to periodically review the financial condition of the issuing bank for any Letter of Credit and any renewal or replacement Letter of Credit and if Lender determines that the issuing bank no longer satisfies the criteria set forth above, Lender may require a replacement Letter of Credit in form and substance and from a United States bank acceptable to Lender.

3.

Standard Disbursement Requirements.  The following shall be defined as "Standard Disbursement Requirements":

(i)

copies of unconditional lien waivers for work completed which is the subject of the Escrow Release request;

(ii)

a title search in form and substance reasonably acceptable to Lender and if such search discloses conditions unacceptable to Lender or Lender deems it reasonably necessary, then such endorsements or other assurances reasonably satisfactory to Lender from the title insurance company insuring the continued first lien priority of the Mortgage;

(iii)

to the extent Lender deems reasonably necessary and to the extent that same are available and appropriate for the work which is the subject of the Escrow Release request, any or all of the following at Lender's discretion:  (A) all permits, bonds, licenses and approvals, whether necessary for commencement, performance, completion, occupancy, use or otherwise required by any applicable laws for the stage of work so completed; (B) a copy of the construction contract and any change orders and addenda thereto; (C) a statement from an architect, contractor or engineering consultant, in Lender's reasonable discretion, as to the extent and cost of the work so completed; and/or (D) other evidence as reasonably determined by Lender showing that Borrower has completed and performed the portion of the work which is the subject of the Escrow Release request; and

(iv)

Lender having inspected, or having expressly waived in writing such inspection, and approved the completed portion of the work which is the subject of the

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Escrow Release request.  Lender shall not require said inspection more than once per calendar year.

4.

Capital Improvements.

a.

Except as hereinafter provided and so long as no Event of Default has occurred and is continuing under the Loan Documents, Lender shall allow Escrow Release(s) in the amounts hereinafter specified in accordance with the following terms and conditions:

(i)

Escrow Release(s) shall be for an amount equal to the actual costs and expenses incurred by Borrower in completing any Capital Improvements;

(ii)

Borrower shall submit written Escrow Release requests to Lender for Capital Improvements no more than once per calendar month and each such request shall be for an aggregate amount of not less than $25,000 (excluding the final disbursement); and

(iii)

Escrow Release(s) shall be conditioned upon Borrower furnishing to Lender with its written request, at Lender's discretion, the Standard Disbursement Requirements.

5.

Interest on Property Reserves.  Provided no Event of Default has occurred under any of the Loan Documents, Lender agrees to credit Borrower with interest earnings on the cash portion of the Property Reserves, (excluding however any cash proceeds resulting from Lender having drawn on any Letter of Credit or any renewal or replacement thereof); provided, however, that interest shall cease to be credited on any portion of the Property Reserves at such time as they have been disbursed to Borrower or otherwise applied in any manner provided in this Agreement or in the other Loan Documents.  Interest shall be credited on the average balance of the cash portion of the Property Reserves for the preceding calendar month or any portion of such preceding calendar month on or before the tenth (10^th) day of each calendar month at a rate equal to the thirty-day average of the daily 30-day Dealer Commercial Paper Rate as p ublished in the Wall Street Journal or similar financial publication, less 200 basis points.  Interest shall be disbursed to Borrower at such time and in the same manner as provided for disbursement of Property Reserves.

6.

Administration/Inspection Fee.  Lender shall be entitled to charge Borrower a reasonable processing fee for administering and reviewing an Escrow Release, not to exceed $500.00.  Lender shall also be entitled to charge Borrower reasonable processing fees both for reviewing any renewal or replacement Letter of Credit which Borrower is required to provide as well as for drawing upon any Letter of Credit held pursuant to the terms hereof (the processing fee for reviewing any renewal or replacement Letter of Credit shall not exceed $250.00).  Borrower shall be responsible for payment of all costs, fees and charges in connection with any

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reduction, renewal or replacement of the Letter of Credit which are assessed by the issuing bank.  Additionally, Lender shall be entitled to charge Borrower for any reasonable costs incurred by Lender in inspecting the Premises, not to exceed $750.00.

7.

Security Agreement.  This Agreement and the escrow of the Property Reserves under the terms hereof are intended to create a prior perfected security interest in the Property Reserves.  As more fully described in the Loan Documents, Borrower has assigned, conveyed, pledged and transferred to Lender and granted to Lender a first and continuing lien on and security interest in and to, among other things, all of Borrower's right, title and interest in and to the Property Reserves, which secure the full and punctual payment and performance of all of the Indebtedness.  Nothing contained herein shall cause Lender to be deemed a trustee of any Letter of Credit, any renewal thereof or any proceeds therefrom.  The Property Reserves shall not constitute any deposit or account of the Borrower or monies to which the Borrower is entitled upon demand, or upon the mere passage of time.  Lender shall not be required to s egregate the Property Reserves or hold them in any separate account for the benefit of the Borrower.  Upon the payment in full of all sums due to Lender under the Loan Documents, Lender shall promptly deliver the then existing Property Reserves to Borrower.

8.

Event of Default.  Upon the occurrence of an Event of Default under any of the Loan Documents, Lender may, with respect to the Property Reserves, or any portion thereof, exercise all enforcement rights and remedies granted to Lender under the Loan Documents and in addition to all other rights and remedies granted to Lender under the Loan Documents, Lender may, at its option, use such funds partially or in full (including any portion or all of the proceeds resulting from drawing on any Letter of Credit), in such order and preference as Lender may determine, to (1) cure or partially cure any Event of Default; (2) complete the work which is the subject of this Agreement; (3) pay any interest accrued under the terms of the Note; (4) pay any other Indebtedness; (5) pay the Make Whole Premium, if any, due and payable; (6) prepay the principal amount of the Loan or any part thereof; or (7) hold such funds in a non-interest bearing account as additional security for the Loan.  In the event the Property Reserves or any portion thereof are applied to prepay the principal amount of the Loan or any part thereof, Borrower waives any right to prepay the principal amount in whole or in part without premium, and agrees to pay, as liquidated damages and not as a penalty, a Make Whole Premium on any principal amount prepaid.  Notwithstanding anything contained herein to the contrary, nothing shall be construed to (a) make Lender responsible for performing or completing the work which is the subject of this Agreement, (b) require Lender to expend sums to complete the work which is the subject of this Agreement which are in excess of such amounts then allocated by Lender for such items, or (c) obligate Lender to demand from Borrower additional sums to complete the work which is the subject of this Agreement.

9.

Cost Overruns.  In the event that the costs and expenses incurred by Borrower in completing any work which is the subject of this Agreement exceed the respective amounts allocated by Lender for such items of expense, Borrower shall be responsible for the payment (from sources other than the Property Reserves) of such excess costs and expenses.

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10.

Notices.  All notices required to be sent hereunder shall be deemed to be an adequate and sufficient notice if given in accordance with the notice provisions of the Mortgage.

11.

Governing Law.  This Agreement shall be governed, construed, and enforced in accordance with the laws of the state in which the Premises is located, without regard to its conflicts of law principles.

12.

Headings.  The headings used herein are for convenience only and are not to be used in interpreting this Agreement.  Capitalized terms used herein and not otherwise defined shall have those meanings given to them in the Loan Documents.  Notwithstanding anything herein to the contrary, the terms and provisions of this Agreement as to Escrow Release(s) shall control over any provisions in the other Loan Documents to the contrary.

13.

Amendments.  This Agreement, and any provisions hereof, may not be modified, amended, waived, extended, changed, discharged or terminated orally or by any act or failure to act on the part of Borrower or Lender, but only by an agreement in writing signed by the parties hereto.

14.

Counterparts.  This Agreement may be executed in counterparts, each of which shall be deemed an original; and such counterparts when taken together shall constitute but one agreement.

15.

Inapplicable Provisions.  If any term, covenant or condition of this Agreement is held to be invalid, illegal or unenforceable in any respect, this Agreement shall be construed without such provision.

16.

Successors and Assigns.  This Agreement and all the provisions hereof shall inure to the benefit of the heirs, successors and assigns of Lender and shall bind the heirs, representatives, and permitted successors and assigns of Borrower.

(Signatures on next page)

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IN WITNESS WHEREOF, Borrower and Lender have hereunto caused this Agreement to be executed the date first above written.

LENDER:

PRINCIPAL LIFE INSURANCE COMPANY, an Iowa corporation

By:

PRINCIPAL REAL ESTATE INVESTORS, LLC, a Delaware limited liability company, its authorized signatory

By

__________________________

Name:

Title:

By

__________________________

Name:

Title:

(Signatures continued on the following page)

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BORROWER:

VMS NATIONAL PROPERTIES, an Illinois general partnership

By:

VMS NATIONAL RESIDENTIAL PORTFOLIO I, an Illinois limited partnership

By:

MAERIL, INC., a Delaware  

                        corporation, its general partner

       By: /s/Patti K. Fielding

       Name:  Patti K. Fielding

                Title:  Executive Vice President  

                           and Treasurer

By:

VMS NATIONAL RESIDENTIAL PORTFOLIO II, an Illinois limited partnership

By:

MAERIL, INC., a Delaware  

                        corporation, its general partner

       By: /s/Patti K. Fielding

       Name:  Patti K. Fielding

                Title:  Executive Vice President  

                           and Treasurer

EX-10

EXHIBIT 10.31

SECURED PROMISSORY NOTE

755500

$31,800,000.00

January 19, 2007

1.

FOR VALUE RECEIVED, VMS NATIONAL PROPERTIES, an Illinois general partnership, as "Borrower" ("Borrower"), hereby promises to pay to the order of PRINCIPAL LIFE INSURANCE COMPANY, an Iowa corporation (as "Lender"), the principal sum of Thirty-one Million Eight Hundred Thousand and 00/100 Dollars ($31,800,000.00) or so much thereof as shall from time to time have been advanced, together with interest on the unpaid balance of said sum from January 19, 2007 (the "Closing Date"), at the rate of six and sixteen one-hundredths percent (6.16%) per annum.  

A payment of interest from the Closing Date to and including January 31, 2007 shall be paid on the Closing Date calculated by multiplying the actual number of days elapsed in the period for which interest is being calculated by a daily rate based on the foregoing annual interest rate and a 360-day year.  Thereafter, interest shall be computed on the unpaid balance on the basis of a 360-day year composed of twelve 30-day months.  Beginning on March 1, 2007, interest shall be due and payable in installments of One Hundred Sixty-three Thousand Two Hundred Forty and 00/100 Dollars ($163,240.00), with an installment in a like amount due and payable on the same day of each month thereafter, and except as otherwise provided in this Note, all remaining principal and interest to the date of payment and other indebtedness shall be due and payable on February 1, 2010 ("Call Date").  Lender shall have the right to declare this Note to be due and payable in full on the Call Date or to adjust the per annum interest rate on the Rate Adjustment Date to an interest rate established by Lender ("Adjusted Interest Rate") as herein provided (and apply an amortization schedule, if any, as herein provided).  In the event Lender elects to declare this Note to be due and payable, this Note shall become due and payable, in full, without a Make Whole Premium on the Call Date.  In the event Lender elects to adjust the interest rate, then on February 1, 2010 ("Rate Adjustment Date") the per annum interest rate shall be adjusted to the Adjusted Interest Rate and commencing on March 1, 2010, monthly installments of principal (if applicable) and interest shall be due and payable on the same day of each month thereafter, except that all remaining principal and interest to the date of payment shall be due and payable on February 1, 2012 or such earlier date resulting from acceleration of the Indebtedness by Lender ("Maturity Date").  Each installment shall be credited first upon interest then accrued and the remainder upon principal.  All principal and interest shall be paid in lawful money of the United States of America, by wire transfer of immediately available funds to Lender.  Any other monthly deposits or payments Borrower is required to make to Lender under the terms of the Loan Documents shall be made by the same payment method and on the same date as the installments of principal and interest due under this Note.

Lender shall notify Borrower in writing ("Lender's Election Notice") on or before November 1, 2009 of Lender's election to adjust the interest rate or of Lender's intention to declare this Note to be due and payable in full.  In the event Lender elects to adjust the interest

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rate, Lender's Election Notice will contain (i) the number of basis points ("Spread") and the United States Treasury Issue (which shall be the two (2) year United States Treasury Issue)  that Lender anticipates it will use to establish the Adjusted Interest Rate and (ii) the amortization schedule Lender has elected to apply, if any.  The Spread shall be determined by Lender in its sole discretion based on Lender's evaluation of:  (i) the then current financial performance and projected risk of the Premises, which shall encompass various factors, including but not limited to contract debt service coverage, loan-to-value ratio, economic debt service coverage, occupancy, frequency of tenant rollover, financial strength and stability of tenants; (ii) the then current financial status of Borrower, which shall include but not be limited to creditworthiness, financial strength, percentage of liabilities to liquid assets, and ann ual net income; and (iii) the remaining term and current outstanding balance of the Note.  

At any time and from time to time before the Adjusted Interest Rate is established, provided at least seven (7) days have elapsed since the previous Lender's Election Notice, Lender may establish a new Spread which Lender anticipates it will use to establish the Adjusted Interest Rate and notify Borrower of the same.  The Adjusted Interest Rate and amortization schedule, if any, must be established by mutual written agreement of Lender and Borrower by December 1, 2009 (the "Rate Set Deadline").  The Adjusted Interest Rate may only be established by mutual written agreement of Lender and Borrower and simultaneous payment by Borrower of Twelve Thousand Three Hundred and 00/100 Dollars ($12,300.00) ("Rate Adjustment Fee"). Notwithstanding anything contained herein to the contrary in the event:  (i) Lender notifies Borrower of its intention to declare this Note to be due and payable in full, (ii) Lender and Borrower are unable for any reason to mutually agree in writing on the Adjusted Interest Rate by the Rate Set Deadline; or (iii) Borrower fails to pay the Rate Adjustment Fee to Lender when due, this Note shall become due and payable in full, on the Call Date, without a Make Whole Premium, and all principal, interest accrued or to accrue to the date of prepayment at the rate in effect at the time of the initial Lender's Election Notice, and all other Indebtedness shall become immediately due and payable in full.  Notwithstanding any other provision herein, Lender shall not be obligated to adjust the interest rate if any default exists under this Note or the Loan Documents.

In the event Borrower accepts the Adjusted Interest Rate, then notwithstanding anything herein or in any of the Loan Documents to the contrary, Borrower shall have no right to prepay the Loan at par during the Open Period and any prepayment will be subject to a Make Whole Premium for the period ending on the Maturity Date calculated at the Adjusted Interest Rate.

In the event Borrower accepts the Adjusted Interest Rate, Borrower is required to provide Lender the following:

(i)

a new ALTA standard loan title policy for the Loan or an endorsement updating said title policy in the full amount of the in form and by an issuer satisfactory to Lender at the time of the rate adjustment unless (x) the outstanding balance of the Loan at the time of the Call Date is equal to or less than $20,000,000.00, (y) no

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liens or encumbrances exist against the Premises except as previously approved by Lender in the Deed of Trust, and (z) no mortgages or deeds of trust exist against the Premises except for the Mortgage.  Borrower further agrees that the policy shall insure Lender's Deed of Trust, at the Adjusted Interest Rate to be a first and prior lien subject only to those exceptions which were previously approved by Lender and provide coverage against mechanic's liens;

(ii)

an amendment to the Note in form and substance satisfactory to Lender executed by Borrower evidencing the Adjusted Interest Rate and a representation that the Premises is free and clear of any liens, privileges, mortgages or encumbrances except as expressly permitted in the Deed of Trust;

(iii)

a usury opinion or endorsement to the title policy acceptable to Lender if Lender reasonably believes that the Adjusted Interest Rate is or may be usurious; and

(iv)

a title search acceptable to Lender and reimbursement for Lender's costs incurred in obtaining the same.

2.

No privilege is reserved by Borrower to prepay any principal of this Note prior to the Maturity Date, except on or after the date hereof, privilege is reserved, after giving thirty (30) days' prior written notice to Lender, to prepay in full, but not in part, all principal and interest to the date on which payment is made, along with all sums, amounts, advances, or charges due under any instrument or agreement by which this Note is secured, upon the payment of a "Make Whole Premium" if required by the schedule below, provided that Borrower simultaneously exercises its right to prepay the Other Note as provided for therein.  The Make Whole Premium shall be based on the following schedule:

(i)

if prepayment occurs prior to March 1, 2008 or after February 1, 2010 and prior to March 1, 2011, the Make Whole Premium shall be one-half percent (.50%) of the principal amount to be prepaid;

(ii)

provided no Event of Default exists, during the period beginning on or after March 1, 2008 to and including February 1, 2010 or on or after March 1, 2011 to and including February 1, 2012 (each collectively the "Open Period") no Make Whole Premium shall be payable.

3.

Borrower agrees that if Lender accelerates the whole or any part of the principal sum evidenced hereby after the occurrence of an Event of Default but prior to the Open Period, Borrower waives any right to prepay said principal sum in whole or in part without premium and agrees to pay, as yield maintenance protection and not as a penalty, the Make Whole Premium.  

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In the event any proceeds from a casualty or Taking of the Premises are applied to reduce the principal balance hereof, such reduction shall be made without a Make Whole Premium, provided no Event of Default then exists under the Loan Documents.

4.

If any payment of principal, interest, or other Indebtedness is not made when due, damages will be incurred by Lender, including additional expense in handling overdue payments, the amount of which is difficult and impractical to ascertain.  Borrower therefor agrees to pay, upon demand, the sum of four cents ($.04) for each one dollar ($1.00) of each said payment which becomes overdue ("Late Charge") as a reasonable estimate of the amount of said damages, subject, however, to the limitations contained in paragraph 6 hereof.

Notwithstanding anything hereinabove to the contrary, the Late Charge assessed on any amount due on the Maturity Date or the Call Date (if Lender declares this Note due and payable as described hereinabove) but not then paid, whether or not by acceleration, shall not be four cents for each one dollar as described above, but shall instead be a sum equal to the interest which would have accrued on the principal balance then outstanding from the date the payment was due to the end of the month in which the Maturity Date or Call Date (if applicable) occurs.  Such Late Charge shall be in addition to interest otherwise accruing under this Note.

5.

If any Event of Default has occurred and is continuing under the Loan Documents, the entire principal balance of the Loan, interest then accrued, and Make Whole Premium, and all other Indebtedness whether or not otherwise then due, shall at the option of Lender, become immediately due and payable without demand or notice, and whether or not Lender has exercised said option, interest shall accrue on the entire principal balance, interest then accrued, Make Whole Premium and any other Indebtedness then due, at a rate equal to the Default Rate until fully paid.

6.

Notwithstanding anything herein or in any of the other Loan Documents to the contrary, no provision contained herein or therein which purports to obligate Borrower to pay any amount of interest or any fees, costs or expenses which are in excess of the maximum permitted by applicable law, shall be effective to the extent it calls for the payment of any interest or other amount in excess of such maximum.  All agreements between Borrower and Lender, whether now existing or hereafter arising and whether written or oral, are hereby limited so that in no contingency, whether by reason of demand for payment or acceleration of the maturity hereof or otherwise, shall the interest contracted for, charged or received by Lender exceed the maximum amount permissible under applicable law.  If, from any circumstance whatsoever, interest would otherwise be payable to Lender in excess of the maximum lawful amount, the interest payable to Lend er shall be reduced to the maximum amount permitted under applicable law; and if from any circumstance Lender shall ever receive anything of value deemed interest by applicable law in excess of the maximum lawful amount, an amount equal to any excessive interest shall, at the option of Lender, be refunded to Borrower or be applied to the reduction of the principal hereof, without a Make Whole Premium and not to the payment of interest or, if such excessive interest

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exceeds the unpaid balance of principal hereof such excess shall be refunded to Borrower.  This paragraph shall control all agreements between Borrower and Lender.

7.

Borrower and any endorsers or guarantors waive presentment, protest and demand, notice of protest, demand and dishonor and nonpayment, and agree the Maturity Date of this Note or any installment may be extended without affecting any liability hereunder, and further promise to pay all reasonable costs and expenses, including but not limited to, reasonable attorney's fees incurred by Lender in connection with any default or in any proceeding to interpret and/or enforce any provision of the Loan Documents.  No release of Borrower from liability hereunder shall release any other maker, endorser or guarantor hereof.

8.

This Note is secured by the Loan Documents creating among other things legal and valid encumbrances on and an assignment of all of Borrower's interest in any Leases of the Premises located in the county of Prince George’s, State of Maryland.  Capitalized terms used herein and not otherwise defined shall have those meanings given to them in the Loan Documents.  In no event shall such documents be construed inconsistently with the terms of this Note, and in the event of any discrepancy between any such documents and this Note, the terms hereof shall govern.  The proceeds of this Note are to be used for business, commercial, investment or other similar purposes, and no portion thereof will be used for any personal, family or household use.  This Note shall be governed by and construed in accordance with the laws of the State where the Premises is located, without regard to its conflict of law principles.

9.

Notwithstanding any provision to the contrary in this Note or the Loan Documents and except as otherwise provided for below, the liability of Borrower under the Loan Documents shall be limited to the interest of Borrower in the Premises and the Rents.  In the event of foreclosure of the liens evidenced by the Loan Documents, no judgment for any deficiency upon the Indebtedness evidenced by the Loan Documents shall be sought or obtained by Lender against Borrower.  Nothing herein shall in any manner limit or impair (i) the lien or enforcement of the Loan Documents pursuant to the terms thereof or (ii) the obligations of any indemnitor or guarantor, if any.

Notwithstanding any provision hereinabove to the contrary, Borrower shall be personally liable to Lender for:

(a)

any loss or damage to Lender arising from (i) the sale or forfeiture of the Premises resulting from Borrower's failure to pay any of the taxes, assessments or charges specified in the Loan Documents or (ii) Borrower's failure to insure the Premises in compliance with the provisions of the Loan Documents;

(b)

any event or circumstance for which Borrower indemnifies Lender under the Environmental Indemnity;

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(c)

nonpayment of taxes, assessments, insurance premiums and utilities for the Premises and any penalty or late charge associated with nonpayment thereof prior to the Sale (as defined below) of the Premises;

(d)

any loss or damage to the Premises as a result of waste, gross negligence or willful misconduct by Borrower;  

(e)

intentionally deleted;

Borrower's personal liability for items specified in (c) and (d) above shall be limited to the amount of rents, issues, proceeds and profits from the Premises ("Rents and Profits") received by Borrower for the twenty-four (24) months preceding an Event of Default and thereafter; but less any such Rents and Profits applied to (A) payment of principal, interest and other charges when due under the Loan Documents, or (B) payment of expenses for the operation, maintenance, taxes, assessments, utility charges and insurance of the Premises including sufficient reserves for the same or replacements or renewals thereof ("Operation Expense(s)") provided that (x) Borrower has furnished Lender with evidence reasonably satisfactory to Lender of the Operation Expenses and payment thereof, and (y) any payments to parties related to Borrower shall be considered an Operation Expense only to the extent that the amount expended for the Operation Expense does not exceed the then current market rate for such Operation Expense.

(f)

misapplication or misappropriation of rents in violation of the Loan Documents;  

(g)

any security deposits of tenants not otherwise applied in accordance with the terms of the Lease(s), together with any interest on such security deposits required by law or the leases, not turned over to Lender upon conveyance of the Premises to Lender pursuant to foreclosure or power of sale or by a deed acceptable to Lender in form and content;

(h)

any loss or damage to Lender arising from the misapplication or misappropriation of tax reserve accounts, tenant improvement reserve accounts, security deposits, prepaid rents or other similar sums paid to or held by Borrower or any other entity or person in connection with Borrower’s operation of the Premises;

(i)

any insurance or condemnation proceeds or other similar funds or payments applied by Borrower in a manner other than as expressly provided in the Loan Documents;

(j)

any loss or damage to Lender arising from any fraud or willful misrepresentation by or on behalf of Borrower, Interest Owner or any guarantor regarding the Premises, the making or delivery of any of the Loan Documents or in any

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materials or information provided by or on behalf of Borrower, Interest Owner or guarantor, if any, in connection with the Loan; and

(k)

any loss or damage to Lender arising from the loss of Lender’s perfection or priority of its security interest in personal property or fixtures covered under any UCC financing statement due to borrower’s failure to notify Lender as provided for in paragraph 1(h) of the Mortgage.

Notwithstanding anything contained in paragraphs 9(a)(i) and 9(c) hereinabove as it relates solely to taxes, assessments and insurance premiums, to the extent Lender is impounding for taxes, assessments and insurance premiums in accordance with the Loan Documents and Borrower has fully complied with all terms and conditions of the Loan Documents relating to impounding for the same, then Borrower shall not be personally liable for Lender's failure to apply any of said impound amounts held by Lender in accordance with the Loan Documents.

Notwithstanding anything to the contrary in the Loan Documents, the limitation on liability contained in the first paragraph of this paragraph 9 SHALL BECOME NULL AND VOID and shall be of no further force and effect in the event:

(y)

of any breach or violation of paragraph 2(f) (due on sale or encumbrance) of the Mortgage, other than (i) the filing of a nonmaterial mechanic's lien affecting the Premises or a mechanic's lien affecting the Premises for which Borrower has complied with the provisions of paragraph 1(e) of the Mortgage, or (ii) the granting of any utility or other nonmaterial easement or servitude burdening the Premises, or (iii) any transfer or encumbrance of a nonmaterial economic interest in the Premises not otherwise set forth in (i) or (ii), or (iv) an immaterial breach or violation of the Property Transfer Requirements, Ownership Transfer Requirements, Specific Transfer Requirements I-V or the Mezzanine Financing Requirements; or

(z)

of any filing by Borrower of a petition in bankruptcy or insolvency or a petition or answer seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under the Bankruptcy laws of the United States or under any other applicable federal, state or other statute or law.

10.

If more than one, all obligations and agreements of Borrower are joint and several.

11.

This Note may not be changed or terminated orally, but only by an agreement in writing and signed by the party against whom enforcement of any waiver, change, modification or discharge is sought.  All of the rights, privileges and obligations hereunder shall inure to the benefit of the heirs, successors and assigns of Lender and shall bind the heirs and permitted successors and assigns of Borrower.  

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12.

If any provision of this Note shall, for any reason, be held to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision hereof, but this Note shall be construed as if such invalid or unenforceable provision had never been contained herein.

13.

This Note may be executed in counterparts, each of which shall be deemed an original; and such counterparts when taken together shall constitute but one agreement.

14.

This provision does not represent a commitment by Lender to lend additional dollars (the "Additional Advance") to Borrower, as Lender is under no obligation to make an Additional Advance. Borrower may request Lender to fund to Borrower an additional advance of principal ("Request for Advance"), provided the requested Additional Advance, in combination with the original Loan, meet certain "Minimum Economic Criteria" (set forth below).    

If Lender does choose to make an Additional Advance, the following conditions precedent must be satisfied:

The "Minimum Economic Criteria" are:

(a)

The combined outstanding Indebtedness on the original Loan and the Additional Advance does not exceed seventy-seven percent (77%) of the appraised value of the Premises as established by an appraisal of the Premises prepared by an MAI appraiser approved by Lender and in form and substance acceptable to Lender, said appraisal at Borrower's cost;

(b)

Debt service of coverage of 1.20 times the annual debt service on the combined outstanding Indebtedness on the original Loan and the Additional Advance, as determined by Lender.  The debt service coverage shall be the annual net operating income divided by the total annual installment payments due under the combined outstanding Indebtedness on the original Loan and the Additional Advance, including accrued or capitalized interest.  Only net operating income from approved executed Leases in effect on the Premises with no uncured defaults shall be used in Lender's determination of the foregoing.  Borrower shall provide a certified rent roll with its Request for Advance; and

(c)

At the time of the Request for Advance, at least twelve (12) months must remain in the Loan term.

Provided no Event of Default exists under the Loan Documents, if Lender determines that the Minimum Economic Criteria are satisfied, Lender may notify Borrower in writing ("Lender's Notice") of the number of basis points ("Spread") and the United States Treasury Issue ("Treasury Issue") that Lender will use to establish the interest rate applicable to the Additional Advance ("AA Interest Rate").  The Spread shall be determined by the Lender, in its sole discretion.

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At any time and from time to time before the date that the AA Interest Rate is agreed to, provided at least seven (7) days have elapsed since the previous Lender's Notice, Lender may establish a new Spread which Lender anticipates it will use to establish the AA Interest Rate and notify Borrower of the same.  The AA Interest Rate must be established by the date which is 30 days following the date of the initial Lender's Notice (the "AA Rate Set Deadline").  The AA Interest Rate may only be established on a date mutually agreed to by Lender and Borrower. If Borrower fails to respond to the most current Lender's Notice in writing by the AA Rate Set Deadline, all of the Lender's Notices shall be deemed rejected.  If Borrower rejects the terms set forth in the Lender's Notice, Borrower shall then have the right to obtain Mezzanine Financing on the terms set forth in the Mortgage.  If Borrower accepts the terms set forth in Lender's Notice, Lender shall agree to fund the Additional Advance, provided the following closing conditions ("Closing Conditions") are met:

(a)

Borrower's execution, delivery, acknowledgement and recordation, as applicable, of acceptable documentation evidencing and securing the Additional Advance including, but not limited to, additional note(s), revised and/or replacement loan modification agreements, indemnification agreements, escrow security or property reserve agreements, security instruments, financing statements, UCCs, new or revised letters of credit and/or guarantees in form and substance satisfactory to Lender;

(b)

Receipt of either (at Lender's discretion) a new ALTA standard loan policy or an endorsement updating the Lender's existing loan policy in the full amount of the Loan (as increased by the Additional Advance), in form and by an issuer satisfactory to Lender, and which insures the Mortgage to be a first and prior lien subject only to those exceptions which were previously approved by Lender and provides coverage against usury and mechanic's liens (an acceptable usury opinion can be substituted for the usury coverage);

(c)

Compliance with Lender's then current underwriting and closing due diligence requirements.

(d)

Receipt of acceptable third party reports addressing property physical and environmental condition, upon request of Lender, prepared by consultants acceptable to Lender;

(e)

Payment by Borrower of all third party expenses incurred, including but not limited to outside counsel fees and costs;

(f)

Payment of Borrower of an "Additional Advance Fee" equal to .5% of the amount of the Additional Advance.  The Additional Advance Fee is non-refundable and is due upon Borrower's acceptance of the terms set forth in the Lender's Notice.

In the event (i) Lender does not choose to make the Additional Advance; (ii) Borrower rejects the terms set forth in the Lender's Notice, or (iii) Borrower is unable to satisfy the

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Closing Conditions, Borrower shall have the ability to obtain Mezzanine Financing as more particularly described in paragraph 2(f) of the Mortgage.

(Signatures on next page)

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IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed and delivered as of the date first set forth above.

VMS NATIONAL PROPERTIES, an Illinois general partnership

By:

VMS NATIONAL RESIDENTIAL PORTFOLIO I, an Illinois limited partnership

By:

MAERIL, INC., a Delaware  

                        corporation, its general partner

By: /s/Patti K. Fielding

       Name:  Patti K. Fielding

                Title:  Executive Vice President  

 and Treasurer

By:

VMS NATIONAL RESIDENTIAL PORTFOLIO II, an Illinois limited partnership

By:

MAERIL, INC., a Delaware  

                        corporation, its general partner

       By: /s/Patti K. Fielding

       Name:  Patti K. Fielding

                Title:  Executive Vice President  

                           and Treasurer

EX-10

EXHIBIT 10.32

Record and return to:

Principal Life Insurance Company

c/o Principal Real Estate Investors, LLC

801 Grand Avenue

Des Moines, IA  50392-1360

ATTN:  Erin Coghlan

DEED OF TRUST, SECURITY AGREEMENT

ASSIGNMENT OF RENTS

THE NOTE SECURED BY THIS DEED OF TRUST CONTAINS AN

ADJUSTABLE INTEREST RATE

755500

A.

THIS DEED OF TRUST, SECURITY AGREEMENT AND ASSIGNMENT OF RENTS (as the same may from time to time hereafter be modified, supplemented or amended, this "Deed of Trust") is made as of January 19, 2007, by and between VMS NATIONAL PROPERTIES, an Illinois general partnership, having its principal place of business and post office address at 4582 South Ulster Street Parkway, Suite 1100, Denver, Colorado 80237, as "Borrower" ("Borrower" to be construed as "Borrowers" if the context so requires), Brenda S. Tyler, of 801 Grand Avenue, Des Moines, Iowa, as "Trustee", and PRINCIPAL LIFE INSURANCE COMPANY, an Iowa corporation, as "Lender".

WITNESSETH:

B.

Borrower is justly indebted to Lender for money borrowed (the "Loan") in the original principal sum of Thirty-one Million Eight Hundred Thousand and 00/100 Dollars ($31,800,000.00) (the "Loan Amount") evidenced by Borrower's secured promissory note of even date herewith, made payable and delivered to Lender (as may be modified, amended, supplemented, extended or consolidated in writing and any note(s) issued in exchange therefor or replacement thereof) (the "Note"), in which Note Borrower promises to pay to Lender the Loan Amount, together with all accrued and unpaid interest thereon, interest accrued at the Default Rate (if any), Late Charges (if any), the Make Whole Premium (if any), and all other obligations and liabilities due or to become due to Lender pursuant to the Loan Documents and all other amounts, sums and expenses paid by or payable to Lender pursuant to the Loan Document s and the Environmental Indemnity (collectively the "Indebtedness") until the Indebtedness has been

paid, but in any event, the unpaid balance (if any) remaining due on the Note shall be due and payable on February 1, 2012 (the "Maturity Date") or such earlier date resulting from the acceleration of the Indebtedness by Lender.  Capitalized terms used herein and not otherwise defined shall have those meanings given to them in the other Loan Documents.

C.

NOW, THEREFORE, to secure the payment of the Indebtedness in accordance with the terms and conditions of the Loan Documents, and all extensions, modifications, and renewals thereof and the performance of the covenants and agreements contained therein, and also to secure the payment of any and all other Indebtedness, direct or contingent, that may now or hereafter become owing from Borrower to Lender in connection with the Loan Documents, and in consideration of the Loan Amount in hand paid, receipt of which is hereby acknowledged, Borrower does by these presents grant and covey in fee simple unto Trustee, its successors and assigns forever, in trust, with power of sale or assent to decree, that certain real estate and all of Borrower's estate, right, title and interest therein, located in the county of Prince George’s, state of Maryland, more particularly described in Exhibit A attached hereto and made a part hereof (t he "Land"), which Land, together with the following described property, rights and interests, is collectively referred to herein as the "Premises".

D.

Together with Borrower's interest as lessor in and to all Leases and all Rents, which are pledged primarily and on a parity with the Land and not secondarily.

E.

Together with all and singular the tenements, hereditaments, easements, appurtenances, passages, waters, water courses, riparian rights, direct flow, ditch, reservoir, well and other water rights, whether or not adjudicated, whether tributary or nontributary and whether evidenced by deed, water stock, permit or otherwise, sewer rights, rights in trade names, licenses, permits and contracts, and all other rights, liberties and privileges of any kind or character in any way now or hereafter appertaining to the Land, including but not limited to, homestead and any other claim at law or in equity as well as any after-acquired title, franchise or license and the reversion and reversions and remainder and remainders thereof.

F.

Together with the right in the case of foreclosure hereunder of the encumbered property for Lender to take and use the name by which the buildings and all other improvements situated on the Premises are commonly known and the right to manage and operate the said buildings under any such name and variants thereof.

G.

Together with all right, title and interest of Borrower in any and all buildings and improvements of every kind and description now or hereafter erected or placed on the said Land and all materials intended for construction, reconstruction, alteration and repairs of such buildings and improvements now or hereafter erected thereon, all of which materials shall be deemed to be included within the Premises immediately upon the delivery thereof to the Premises, and all fixtures now or hereafter owned by Borrower and attached to or contained in and used exclusively in connection with the Premises including, but not limited to, all machinery, motors, elevators, fittings, radiators, awnings, shades, screens, all gas and electric fixtures, appliances (including without limitation, ranges, rangetops, ovens, stoves, cooking apparatus and

appurtenances, dishwashers, refrigerators, trash compactors, microwaves, washers, dryers, and garbage disposals), water heaters, mirrors, mantels, carpeting and all other floor coverings, window coverings and treatments, cable television equipment, water softeners, storm sashes, and all plumbing, heating, lighting, ventilating, refrigerating, incinerating, air-conditioning and sprinkler equipment and fixtures and appurtenances thereto; and all items of furniture, furnishings, equipment and personal property owned by Borrower used exclusively in the operation of the Premises; and all renewals or replacements of all of the aforesaid property owned by Borrower or articles in substitution therefor, whether or not the same are or shall be attached to said buildings or improvements in any manner (collectively, the "Improvements"); it being mutually agreed, intended and declared that all the aforesaid property owned b y Borrower and placed by it on the Land or used exclusively in connection with the operation or maintenance of the Premises shall, so far as permitted by law, be deemed to form a part and parcel of the Land and for the purpose of this Deed of Trust to be Land and covered by this Deed of Trust, and as to any of the property aforesaid which does not form a part and parcel of the Land or does not constitute a "fixture" (as such term is defined in the Uniform Commercial Code ("UCC")), this Deed of Trust and the other Loan Documents (the terms of which grant a security interest in personal property or real property, the proceeds of which may become personal property) are each hereby deemed to be, as well, a security agreement under the UCC for the purpose of creating a security interest in all items, including, but not limited to, all property and rights which Borrower may grant, assign, bargain, sell, transfer, set over, deliver, or otherwise convey to Lender, as secured party, under the term s of this Deed of Trust or any of the other Loan Documents, including any and all proceeds thereof (as used herein, Borrower shall mean "Debtor" under the UCC and Lender shall mean "Secured Party" under the UCC).  Borrower hereby appoints Lender as its attorney-in-fact to execute such documents necessary to perfect Lender's security interest and authorizes Lender at any time until the Indebtedness is paid in full, to prepare and file, at Borrower's expense, any and all UCC financing statements, amendments, assignments, terminations and the like, necessary to create and/or maintain a prior security interest in such property all without Borrower's execution of the same.  Furthermore, upon a default under the Loan Documents, Lender will, in addition to all other remedies provided for in the Loan Documents, have the remedies provided for under the UCC in effect in the state in which the Premises is located.

H.

Together with all right, title and interest of Borrower, now or hereafter acquired, in and to any and all strips and gores of land adjacent to and used in connection with the Premises and all right, title and interest of Borrower, now owned or hereafter acquired, in, to, over and under the ways, streets, sidewalks and alleys adjoining the Premises.  

I.

Together with all funds now or hereafter held by Lender under any property reserves agreement (including any proceeds derived from any letter of credit) or escrow security agreement or under any of the terms hereof or of the Loan Documents, including but not limited to funds held under the provisions of paragraph 5 hereof.

J.

Together with all of Borrower's payment intangibles, letter of credit rights, interest rate cap agreements, tenant in common agreement rights, and any other contract rights of Borrower related in any manner to the ownership, operation, or management of the Premises, as well as any

and all supporting obligations, and all proceeds, renewals, replacements and substitutions thereof.

K.

Together with all funds, accounts and proceeds thereof relating to the Premises whether or not such funds, accounts or proceeds thereof are held by Lender under the terms of any of the Loan Documents, including, but not limited to bankruptcy claims of Borrower against any tenant at the Premises, and any proceeds thereof; proceeds of any Rents, insurance proceeds from all insurance policies required to be maintained by Borrower under the Loan Documents and all awards, decrees, proceeds, settlements or claims for damage now or hereafter made to or for the benefit of Borrower by reason of any damage to, destruction of or taking of the Premises or any part thereof, whether the same shall be made by reason of the exercise of the right of eminent domain or by condemnation or otherwise (a "Taking").

This Deed of Trust is given to secure not only the Indebtedness advanced on the date hereof, but also any and all future advances made pursuant to this Deed of Trust , the Note or any of the other Loan Documents, whether such advances are obligatory or are to be made at the option of the Lender, or otherwise, to the same extent as if such future advances were made on the date of execution and delivery of this Deed of Trust.  The total principal amount of the Indebtedness may increase or decrease from time to time; provided, however, that the aggregate principal Indebtedness shall not exceed at any one time the amount of Thirty-one Million Eight Hundred Thousand and 00/100 Dollars ($31,800,000.00), plus interest thereon, any Make Whole Premium, and other amounts, payments and premiums due on account thereof, and all other indebtedness of the Borrower to the Lender payable pursuant to or secured by the Loan Documents, and all other payments required to be made by Borrower pursuant to or secured by the Loan Documents.

L.

TO HAVE AND TO HOLD the same unto Trustee, Trustee's successors and assigns, upon the trusts, covenants and agreements herein expressed.  

M.

Borrower represents that it is the absolute owner in fee simple of the Premises described in Exhibit A, which Premises are free and clear of any liens or encumbrances except as set forth in the loan policy of title insurance for the Premises issued to Lender, and except for taxes which are not yet due or delinquent.  Borrower shall forever warrant and defend the title to the Premises against all claims and demands of all persons whomsoever and will on demand execute any additional instrument which may be required to give Trustee a valid first lien on all of the Premises, subject to the "Permitted Encumbrances" set forth in the loan policy of title insurance for the Premises issued to Lender.  

N.

Borrower further represents that (i) the Premises is not subject to any casualty damage; (ii) Borrower has not received any written notice of any eminent domain or condemnation proceeding affecting the Premises; (iii) all leasing broker fees and commissions payable by Borrower with respect to the Lease(s) have been paid in full, in cash or other form of immediately available funds; (iv) to the best of Borrower's knowledge, following due and diligent inquiry, there are no actions, suits or proceedings pending, completed or threatened against or

affecting Borrower or any person or entity owning an interest (directly or indirectly) in Borrower ("Interest Owner(s)") or any property of Borrower or any Interest Owner in any court or before any arbitrator of any kind or before or by any governmental authority (whether local, state, federal or foreign) that, individually or in the aggregate, could reasonably be expected by Lender to be material to the transaction contemplated hereby and (v) the Premises and the intended uses thereof are in compliance with all applicable laws, regulations and ordinances, including without limitation, the Americans with Disabilities Act of 1990 (42 U.S.C. §12101, et seq.), the Federal Architectural Barriers Act (42 U.S.C. §3601, et seq.), the Fair Housing Amendments Act of 1988 (42 U.S.C. §3601, et seq.), and the Rehabilitation Act of 1973 (29 U.S.C. §794) and any amendments, modifications or supplements th ereto.

O.

Borrower further represents and warrants that as of the date hereof and until the Indebtedness is paid in full

(a)

Borrower and each person or entity owning an interest in Borrower is not and will not be (i) identified on the Specially Designated Nationals and Blocked Persons List maintained by the Office of Foreign Assets Control, Department of the Treasury ("OFAC") and/or on any other similar list maintained by OFAC pursuant to any authorizing statute, executive order or regulation (collectively, the "List"), (ii) a person or entity with whom a citizen of the United States is prohibited to engage in transactions by any trade embargo, economic sanction, or other prohibition of United States law, regulation, or Executive Order of the President of the United States;

(b)

none of the funds or other assets of Borrower constitute or will constitute property of, or are or will be beneficially owned, directly or indirectly, by any Embargoed Person (as hereinafter defined);

(c)

no Embargoed Person has or will have any interest of any nature whatsoever in Borrower (whether directly or indirectly);

(d)

none of the funds of Borrower have been or will be derived from any unlawful activity with the result that the investment in Borrower is prohibited by law or that the Loan Documents are in or will be in violation of law,

(e)

Borrower has and will continue to implement procedures, and has consistently and will continue to consistently apply those procedures, to ensure the foregoing representations and warranties remain true and correct at all times.  The term "Embargoed Person" means any person, entity or government subject to trade restrictions under U.S. law, including but not limited to, the International Emergency Economic Powers Act, 50 U.S.C. §1701 et seq., The Trading with the Enemy Act, 50 U.S.C. App. 1 et seq., and any Executive Orders or regulations promulgated thereunder with the result that the investment in Borrower is prohibited by law or Borrower is in violation of law;

(f)

Borrower has complied and will continue to comply with all requirements of law relating to money laundering, anti-terrorism, trade embargos and economic sanctions, now or hereafter in effect;

(g)

Borrower has not and will not use funds from any "Prohibited Person" (as such term is defined in the September 24, 2001 Executive Order Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism) to make any payment due to Lender under the Loan Documents

Borrower will immediately notify Lender in writing if any of the representations, warranties or covenants are no longer true or have been breached or if Borrower has a reasonable basis to believe that they may no longer be true or have been breached.  In addition, Borrower will, at the request of Lender, provide such information as may be requested by Lender to determine Borrower's compliance with the terms hereof.

P.

Borrower further represents and warrants that as of the date hereof and until the Indebtedness is paid in full: (i) Borrower is not and will not be an "employee benefit plan" as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), which is subject to Title I of ERISA; (ii) the assets of Borrower do not and will not constitute "plan assets" of one or more such plans for purposes of Title I of ERISA; (iii) Borrower is not and will not be a "governmental plan" within the meaning of Section 3(32) of ERISA; (iv) transactions by or with Borrower are not and will not be subject to state statutes applicable to Borrower regulating investments of and fiduciary obligations with respect to governmental plans; (v) Borrower has made and will continue to make all required contributions to all employee benefit plans, if any, established for or on behalf of Borrower or to which Borrower is required to contribute; (vi) Borrower has and will continue to administer each such plan, if any, in accordance with its terms and the applicable provisions of ERISA and any other federal or state law; and (vii) Borrower has not and will not permit any liability under Sections 4201, 4243, 4062 or 4069 of Title IV of ERISA or taxes or penalties relating to any employee benefit plan or multi-employer plan to become delinquent or assessed, respectively, which would have a material adverse effect upon (i) the business or the financial position or results of operation of Borrower, (ii) the ability of Borrower to perform, or of Lender to enforce, any of the Loan Documents or Environmental Indemnity, or (iii) the value of the Premises.

Q.

Borrower hereby represents and warrants that the transaction described herein is a commercial loan within the meaning of Sections 12-101(c) and 12-103(e)(1)(ii) of the Commercial Law Article of the Maryland Code.

BORROWER COVENANTS AND AGREES AS FOLLOWS:  

1.

Borrower shall

(a)

pay each item of Indebtedness secured by this Deed of Trust when due according to the terms of the Loan Documents;

(b)

pay a Late Charge on any payment of principal, interest, Make Whole Premium or Indebtedness which is not paid on or before the due date thereof to cover the expense involved in handling such late payment;

(c)

pay on or before the due date thereof any indebtedness permitted to be incurred by Borrower pursuant to the Loan Documents and any other claims which could become a lien on the Premises (unless otherwise specifically addressed in paragraph 1(e) hereof), and upon request of Lender exhibit satisfactory evidence of the discharge thereof;

(d)

complete within a reasonable time, the construction of any Improvements now or at any time in process of construction upon the Land;

(e)

manage, operate and maintain the Premises and keep the Premises, including but not limited to, the Improvements, in good condition and repair and free from mechanics' liens or other liens or claims for liens, provided however, that Borrower may in good faith, with reasonable diligence and upon written Notice to Lender within thirty (30) days after Borrower has knowledge of such lien or claim, contest the validity or amount of any such lien or claim and defer payment and discharge thereof during the pendency of such contest in the manner provided by law, provided that (i) such contest may be made without the payment thereof; (ii) such contest shall prevent the sale or forfeiture of the Premises or any part thereof, or any interest therein, to satisfy such lien or claim; (iii) Borrower shall have obtained a bond over such lien or claim from a bonding company acceptable to Lender which has the effect of removing such lien or collection of the claim or lien so contested; and (iv) Borrower shall pay all costs and expenses incidental to such contest; and further provided, that in the event of a final, non-appealable ruling or adjudication adverse to Borrower, Borrower shall promptly pay such claim or lien, shall indemnify and hold Lender and the Premises harmless from any loss or damage arising from such contest and shall take whatever action necessary to prevent sale, forfeiture or any other loss or damage to the Premises or to the Lender;  

(f)

comply, and cause each lessee or other user of the Premises to comply, with all requirements of law and ordinance, and all rules and regulations, now or hereafter enacted, by authorities having jurisdiction of the Premises and the use thereof, including but not limited to all covenants, conditions and restrictions of record pertaining to the Premises, the Improvements, and the use thereof (collectively, "Legal Requirements");

(g)

subject to the provisions of paragraph 6 hereof, promptly repair, restore or rebuild any Improvements now or hereafter a part of the Premises which

may become damaged or be destroyed by any cause whatsoever, so that upon completion of the repair, restoration and rebuilding of such Improvements, there will be no liens of any nature arising out of the construction and the Premises will be of substantially the same character and quality as it was prior to the damage or destruction;

(h)

if other than a natural person, do all things necessary to preserve and keep in full force and effect its existence, franchises, rights and privileges under the laws of the state of its formation and, if other than its state of formation, the state where the Premises is located.  Borrower shall notify Lender at least thirty (30) days prior to (i) any relocation of Borrower's principal place of business to a different state or any change in Borrower's state of formation, and/or (ii) if Borrower is an individual, any relocation of Borrower's principal residence to a different state;

(i)

do all things necessary to preserve and keep in full force and effect Lender's title insurance coverage insuring the lien of this Deed of Trust as a first and prior lien, subject only to the Permitted Encumbrances stated in the title insurance policy issued to Lender and any other exceptions after the date of this Deed of Trust approved in writing by Lender, including without limitation, delivering to Lender not less than 30 days prior to the effective date of any rate adjustment, modification or extension of the Note or any other Loan Document, any new policy or endorsement which may be reasonably required to assure Lender of such continuing coverage;

(j)

execute any and all documents which may be required to perfect the security interest granted by this Deed of Trust; and

(k)

comply and cause the Premises and the intended uses thereof to comply with all laws, rules, and regulations affecting the Premises or any portion thereof or any use thereof and, upon request by Lender, provide Lender with such evidence as may be reasonably required by Lender to confirm such compliance, such evidence to include, without limitation, letters, licenses, permits, certificates and other correspondence from the appropriate governmental authorities, and opinions or certifications from architects or engineers.  The laws, regulations and ordinances with which compliance should be evidenced include, in addition to the foregoing and without limitation, the following:  building codes, health and environmental protection laws, erosion control ordinances, federal statutes, doing business and/or licensing laws and zoning laws (the evidence submitted as to zoning should include the zoning designation made for the Premises, the permitted uses of the Premises under such zoning designation and zoning requirements as to parking, lot size, ingress, egress and building setbacks).

(l)

in the event Permitted Transfer (viii) of paragraph 2(f) occurs, remain a Single-Asset Entity;  

As used herein, the term Single-Asset Entity means:

a corporation, limited or general partnership, limited liability company, or business trust which, at all times until the Indebtedness is paid in full (i) will not have any other assets other than the Premises, cash and marketable securities, and (ii) will not create, assume, incur, guarantee or become liable for debt, obligations, or performance of obligations for the benefit of any other person or entity except for liabilities incurred in the normal operation of the Premises (other than liabilities secured by the Premises).

2.

Borrower shall not:

(a)

except as required by applicable Legal Requirements, construct any building or structure nor make any alteration or addition (other than normal repair and maintenance) to (i) the roof or any structural component of any Improvements on the Premises, or (ii) the building operating systems, including but not limited to, the mechanical, electrical, heating, cooling, or ventilation systems (other than replacement with equal or better quality and capacity), without the prior written consent of Lender not to be unreasonably withheld;

(b)

remove or demolish any material Improvements, or any portion thereof, which at any time constitutes a part of the Premises.

Notwithstanding anything hereinabove to the contrary, Borrower may construct, remove or demolish tenant improvements within the then existing building(s) or other structures to the extent such work is required solely under the terms of any Leases approved by Lender provided (i) no Event of Default exists under the Loan Documents; (ii) the work is completed on a timely basis, in a good, workmanlike, lien-free manner and in accordance with all Legal Requirements, and (iii) such work does not negatively affect the structural integrity of the Improvements or the value of the Premises;

(c)

cause or permit any change to be made in the general use of the Premises without Lender's prior written consent;

(d)

initiate any or acquiesce to a zoning reclassification or material change in zoning without Lender's prior written consent.  Borrower shall use all reasonable efforts to contest any such zoning reclassification or change;

(e)

make or permit any use of the Premises that could with the passage of time result in the creation of any right of use, or any claim of adverse possession or easement on, to or against any part of the Premises in favor of any person or entity or the public;

(f)

allow any of the following to occur (unless a Permitted Transfer):

(i)

a Transfer of all or any portion of the Premises or any interest in the Premises;

(ii)

a Transfer of any ownership interest in Borrower or any entity which owns, directly or indirectly, an interest in Borrower at any level of the ownership structure; or

(iii)

in addition to (i) and (ii) above, if the Borrower is a trust, or if a trust owns an interest, directly or indirectly, in any entity which owns an interest in Borrower at any level of the ownership structure, the addition, deletion or substitution of a trustee of such trust.  

If any of such events occur, it shall be null and void and shall constitute an Event of Default under the Loan Documents.

It is understood and agreed that the Indebtedness evidenced by the Note is personal to Borrower and in accepting the same Lender has relied upon what it perceived as the willingness and ability of Borrower to perform its obligations under the Loan Documents and the Environmental Indemnity and as lessor under the Leases of the Premises.  Furthermore, Lender may consent to a Transfer and expressly waive Borrower's covenants contained in this paragraph 2(f), in writing to Borrower; however any such consent and waiver shall not constitute any consent or waiver of such covenants as to any Transfer other than that for which the consent and waiver was expressly granted.  Furthermore, Lender's willingness to consent to any Transfer and waive Borrower's covenants contained in this paragraph 2(f), implies no standard of reasonableness in determining whether or not such consent shall be granted and the same may be based upon what Lend er solely deems to be in its best interest.

For purposes of the Loan Documents, the following terms shall have the respective meanings set forth below:

"Transfer" or "Transferred" shall mean with respect to the Premises, an interest in the Premises, or an ownership interest or interest therein:

(i)

a sale, assignment, transfer, conveyance or other disposition (whether voluntary, involuntary or by operation of law);

(ii)

the creation, sufferance or granting of any lien, encumbrance, security interest or collateral assignment (whether voluntarily, involuntarily or by operation of law), other than the lien hereof, the leases of the Premises assigned to Lender, the Permitted Encumbrances and those liens which Borrower is contesting in accordance with the provisions of paragraph 1(e);

(iii)

the issuance or other creation of ownership interests in an entity;

(iv)

the reconstitution or conversion from one entity to another type of entity;

(v)

a merger, consolidation, reorganization or any other business combination; or

(vi)

a conversion to or operation of all or any portion of the Premises as a cooperative or condominium form of ownership.

"Permitted Transfer" shall mean:

(i)

a minor (as determined by Lender) conveyance of an interest in the Premises by Borrower, such as a utility easement, and for which Lender has given its prior written consent and imposed such conditions as Lender deems advisable and appropriate;

(ii)

a sale, assignment, transfer or conveyance of all or any portion of the Premises or an interest in the Premises for which Borrower has complied with all of the Property Transfer Requirements;

(iii)

any of the following Transfers for which Borrower has complied with all of the Ownership Transfer Requirements as applicable and Lender has given its prior written consent (and in connection with such consent, Lender may impose any conditions it wishes in its reasonable discretion);

(A)

a sale, assignment, transfer, or conveyance of an ownership interest or interest therein;

(B)

the issuance or other creation of ownership interests in an entity;

(C)

a reconstitution or conversion from one entity to another type of entity;

(D)

a merger, consolidation, reorganization or any other business combination;

(iv)

transfers of general partner interest in Borrower between VMS National Residential Portfolio I and VMS National Residential Portfolio II ("Borrower Interest Owners") for which Borrower has complied with all of the Specific Transfer Requirements I;

(v)

transfers of general partner interests in Borrower that represent less than 49%, individually or in the aggregate, of all ownership interests in Borrower to individuals or entities other than Borrower

Interest Owners for which Borrower has complied with all of the Specific Transfer Requirements II;

(vi)

Borrower's right to obtain mezzanine financing for which Borrower has complied with all the Mezzanine Financing Requirements;

(vii)

any assumption of less than 100% of the limited partnership interests in Borrower Interest Owners by any affiliate of AIMCO REIT for which Borrower has complied with all of the Specific Transfer Requirements III;

(viii)

conversion of the Borrower to a Single Asset Entity (as defined in paragraph 1(l)) wholly owned by AIMCO REIT and/or AIMCO OP and transfer of the Premises to said Single Asset Entity for which Borrower has complied with all of the Specific Transfer Requirements IV;

(ix)

a transfer of any general partnership interest in Borrower to a Qualified REIT Subsidiary, as defined in Section 856(i)(2) of the Internal Revenue Code of 1986, 100% owned by AIMCO REIT or to a Qualified REIT Subsidiary, as defined in Section 856(e)(1) of the Internal Revenue Code of 1986, 100% owned by AIMCO OP for which Borrower has complied with all of the Specific Transfer Requirements V;

(ix)

a transfer of shares of common stock, limited partnership interests or other beneficial or ownership interests or other forms of securities in AIMCO REIT or AIMCO OP (defined below), and the issuance of all varieties of convertible debt, equity and other similar securities of AIMCO REIT or AIMCO OP, and the subsequent transfer of such securities; provided, however, that no Change of Control (defined below) occurs as a result of such transfer, either upon such transfer or upon the subsequent conversion to equity of such convertible debt or other securities.

(x)

The issuance by AIMCO REIT or AIMCO OP of additional common stock, limited partnership interests or other beneficial or ownership interests, convertible debt, equity and other similar securities, and the subsequent transfer of such convertible debt or securities; provided, however, that no Change of Control occurs as the result of such transfer, either upon such transfer or upon the subsequent conversion to equity of such convertible debt or other securities.

(xi)

So long as AIMCO REIT owns 100% of the stock of AIMCO-LP, Inc. and AIMCO-GP, Inc. (and AIMCO-GP, Inc. remains the general partner of AIMCO OP), a transfer of limited partnership interests that results in AIMCO-LP, Inc. owning not less than 50.1% of the limited partnership interests in AIMCO OP.

For purposes of this Permitted Transfer Section, the following terms shall

be defined as follows:

(A)

"Change of Control" shall mean the earliest to occur of (1) the date an Acquiring Person becomes (by acquisition, consolidation, merger or otherwise), directly or indirectly, the beneficial owner of more than forty percent (40%) of the total Voting Equity Capital of AIMCO REIT then outstanding, or (2) the date on which AIMCO REIT shall cease to hold (whether directly or indirectly through a wholly owned intermediary entity such as AIMCO-LP, Inc. or AIMCO-GP, Inc.) at least 50.1% of the limited partnership interests in AIMCO OP, or (3) the date on which AIMCO REIT shall cease for any reason to hold (whether directly or indirectly) (i) the interests in the Managing General Partner held as of the date of this Deed of Trust (as evidenced by organizational charts and documents submitted to Lender as of such date) and (ii) the Controlling Interest(s) in the Borrower, or (4) the replacement (other than solely by reason of retireme nt at age sixty-five or older, death or disability) of more than 50% (or such lesser percentage as is required for decision making by the board of directors of trustees, if applicable) of the members of the board of directors (or trustee, if applicable) of AIMCO REIT over a one-year period where such replacement shall not have been approved by a vote of at least a majority of the board of directors (or trustees, if applicable) of AIMCO REIT then still in office who either were members of such board of directors (or trustees, if applicable) at the beginning of such one year period or whose election as members of the board of directors (or trustees, if applicable) was previously so approved.

(B)

"Acquiring Person" shall mean a "person" or, group of "persons" within the meaning of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended. However, notwithstanding the foregoing, "Acquiring Person" shall not be deemed to include any member of the Borrower Control Group unless such member has, directly or indirectly, disposed of, sold or otherwise transferred to, or encumbered or restricted (whether by means of voting trust agreement or otherwise) for the benefit of an Acquiring Person, all or any portion of the Voting Equity Capital of AIMCO RElT directly or indirectly owned or controlled by such member or such member directly or indirectly votes all or any portion of the Voting Equity Capital of AIMCO REIT, directly or indirectly, owned or

controlled by such member for the taking of any action which, directly or indirectly constitutes or would result in a Change of Control, in which event such member of the Borrower Control Group shall be deemed to constitute an Acquiring Person to the extent of the Voting Equity Capital of AIMCO REIT owned or controlled by such member.

(C)

"Borrower Control Group" shall mean a majority of the Board of Directors of AIMCO REIT.

(D)

A "Person" shall mean an individual, an estate, a trust, a corporation, a partnership, a limited liability company or any other organization or entity (whether governmental or private).

(E)

"Security" shall have the same meaning as in Section 2(1) of the Securities Act of 1933, as amended.

(F)

"Controlling Interest(s)" shall mean (i) with respect to a partnership, such majority and/or managing general partner interests which, together with a majority of limited partnership interests if necessary for consent purposes, vest in the holder of such interests the sale power, right and authority to control the day to day operations of the Borrower; including, without limitation, the authority to manage, operate and finance the Premises, (ii) with respect to a corporation, the number of shares which entitle the holder to elect a majority of the board of directors of the Borrower, and (iii) with respect to a limited liability company, such majority and/or managing member interests as vest in the holder of such interests the sole power, right and authority to control the day to day operations of the Borrower; including, without limitation, the authority to manage, operate and finance the Premises.

(G)

"AIMCO REIT" shall mean Apartment Investment and Management Company, a corporation organized and existing under the laws of the State of Maryland.

(H)

"AIMCO OP" shall mean AIMCO Properties, L.P., a limited partnership organized and existing under the laws of the State of Delaware.

(I)

"Managing General Partner" shall mean the entity executing this Deed of Trust on behalf of the Borrower and/or its successors or assigns in interest.

(J)

"Voting Equity Capital" shall mean securities of any class or classes, the holders of which are ordinarily, in the absence of contingencies, entitled to elect a majority of the board of directors (or Persons performing similar functions).

"Property Transfer Requirements" are all of the following:

1.

Prior review and approval of the proposed purchaser or other transferee and the subject transaction by Lender, at Lender's reasonable discretion.  Review of the proposed purchaser or other transferee and the subject transaction shall encompass various factors, including, but not limited to, the proposed purchaser's or other transferee's creditworthiness, financial strength, and real estate management and leasing expertise as well as the proposed transaction's effect on the Premises, the Borrower, and other security for the Loan;

2.

Payment to Lender of an assumption fee equal to one percent (1%) of the principal balance of the Note; provided, however, that Lender will require up to $15,000.00 of such fee to be paid at the beginning of Lender's review process, and such sum shall be nonrefundable and earned upon receipt by Lender whether or not the transaction is ultimately completed or Lender ultimately approves the proposed purchaser or other transferee;

3.

Receipt, at Borrower's expense, of either (at Lender's discretion) a new ALTA standard loan policy or an endorsement updating the Lender's existing loan policy in the full amount of the Loan, in form and by an issuer satisfactory to Lender, and which insures this Deed of Trust to be a first and prior lien subject only to those exceptions which were previously approved by Lender and provides coverage against usury and mechanic's liens;

4.

Receipt by Lender of copies of all relevant information and documentation relating to or required by Lender in connection with the proposed transfer including but not limited to (a) the organizational documents of the proposed transferee and an opinion of counsel satisfactory to Lender as to its due formation, valid existence and authority to enter into and carry out the proposed transaction; (b) the deeds or other instruments of transfer

and documents relating to the assignment and assumption of Leases; (c) evidence of compliance with the insurance requirements contained in the Loan Documents; and (d) compliance with such other closing requirements as are customarily imposed by Lender in connection with such transactions;

5.

Execution, delivery, acknowledgment and recordation, as applicable, of new, revised and/or replacement assumption agreements, loan modification agreements, indemnification agreements, escrow security or property reserves agreements, security instruments, financing statements, UCCs, new or revised letters of credit and/or guarantees in form and substance reasonably satisfactory to Lender;

6.

Payment of outside counsel fees and costs, other applicable professional's fees and costs, taxes, recording fees and the like, and any other fees and costs incurred; and

7.

Receipt by Lender of 60 days advance written notice of the proposed Transfer in question.

"Ownership Transfer Requirements" are all of the Property Transfer Requirements which Lender deems appropriate in its reasonable discretion, as well as a reasonable processing fee to be determined by Lender; provided, however, that (i) with respect to item 2 of the Property Transfer Requirements, the 1% fee shall be prorated (subject, however, to a $15,000 minimum) based on Lender's calculation of the effective percentage interest in Borrower transferred, and (ii) item 3 of the Property Transfer Requirements shall be required, at Lender's reasonable discretion, only in the event of (A) a merger, consolidation, reorganization or any other business combination, or (B) a reconstitution or conversion from one entity to another type of entity.

"Specific Transfer Requirements I" are all of the following:  

1.

AIMCO REIT (as defined below) and/or AIMCO OP (as defined below) (collectively) retain 20% indirect ownership interest in and retain management and control of Borrower and there is no change in the management and day-to-day operations at the Premises, unless otherwise approved by Lender;

2.

Lender receives notice of such transfer within thirty (30) days of the consummation of such transfer; and

3.

Lender receives an organizational chart for Borrower which includes ownership breakdowns for all entity levels and is certified by Borrower as true and correct.

Specific Transfer Requirements II are all of the following:

1.

AIMCO REIT and/or AIMCO OP (collectively) retain 20% indirect ownership interest in and retain management and control of Borrower and there is no change in the management and day-to-day operations at the Premises, unless otherwise approved by Lender;

2.

Lender receives notice of such transfer within thirty (30) days of the consummation of such transfer along with the organizational documents of the transferee;

3.

At Lender's option, Lender receives an acceptable background and credit check, at Borrower's cost, for the proposed transferee if said proposed transferee's interest in Borrower will equal or exceed 20%;

4.

At Lender's option, Lender receives an acceptable OFAC report (research of the Office of Foreign Assets Control "Watched" companies list), at Borrower's cost;

5.

Lender receives an organizational chart for Borrower which includes ownership breakdowns for all entity levels and is certified by Borrower as true and correct; and

6.

Lender receives payment of an assumption fee equal to the greater of: (a) one-half percent (0.5%) of the outstanding principal balance of the Note prorated based on Lender's calculation of the effective percentage interest in Borrower transferred; or (b) $3,000.00.

Specific Transfer Requirements III are all of the following:

1.

AIMCO REIT and/or AIMCO OP (collectively) retain 20% indirect ownership interest in and retain management and control of Borrower and there is no change in the management and day-to-day operations at the Premises, unless otherwise approved by Lender;

2.

Lender receives notice of such transfer within thirty (30) days of the consummation of such transfer;

3.

Lender receives an organizational chart for Borrower which includes ownership breakdowns for all entity levels and is certified by Borrower as true and correct; and

4.

Lender receives a processing fee of $500.00.

Specific Transfer Requirements IV are all of the following:

1.

Property Transfer Requirements 3-7; and

2.

Lender receives a processing fee of $3,000.00.

Specific Transfer Requirements V are all of the following:

1.

AIMCO REIT and/or AIMCO OP (collectively) retain 20% indirect ownership interest in and retain management and control of Borrower and there is no change in the management and day-to-day operations at the Premises, unless otherwise approved by Lender;

2.

Lender receives notice of such transfer within thirty (30) days of the consummation of such transfer along with the organizational documents of the transferee;

3.

At Lender's option, Lender receives an acceptable background and credit check, at Borrower's cost, for the proposed transferee if said proposed transferee's interest in Borrower will equal or exceed 20%;

4.

At Lender's option, Lender receives an acceptable OFAC report (research of the Office of Foreign Assets Control "Watched" companies list), at Borrower's cost;

5.

Lender receives an organizational chart for Borrower which includes ownership breakdowns for all entity levels and is certified by Borrower as true and correct; and

6.

Lender receives payment of a processing fee of $1,000.00.

"Mezzanine Financing Requirements" are all of the following:

(i)

no Event of Default has occurred under the Loan Documents;

(ii)

the mezzanine borrower may not be Borrower;

(iii)

the mezzanine debt is used solely to reimburse the mezzanine borrower for the costs associated with the repair and/or improvement of the Premises subject to the terms and conditions of the Loan Documents;

(iv)

the combined outstanding Indebtedness on the Loan and proposed mezzanine financing does not exceed eighty percent (80%) of the appraised value of the Premises as calculated by Lender at the time of funding of the mezzanine financing or at Lender's option as established by an appraisal of the Premises prepared by an MAI appraiser approved by Lender and in form and substance acceptable to Lender, which appraisal shall be paid for by Borrower;

(v)

a minimum of 1.05 debt service coverage, based on a 30-year amortization schedule, is maintained.  The debt service coverage shall be the annual net cash flow (annual net operating income after deduction for tenant improvements, leasing commissions, annual replacement reserves and a management fee) divided by the

total annual installment payments due under the Note secured hereby and on any proposed mezzanine financing including accrued or capitalized interest.  Only net operating income from approved executed leases in effect on the Premises with no uncured defaults shall be used in Lender's determination of the annual net cash flow;  

(vi)

the only security for the mezzanine financing is a pledge of ownership interests in Borrower or an owner of Borrower, directly or indirectly and such financing does not encumber nor result in any lien or charge upon or against the Premises or the Rents; and

(vii)

Lender's reasonable approval of the mezzanine lender as well as any successor or assign of mezzanine lender, any of which must be an institutional lender;

(viii)

Lender's reasonable approval of the mezzanine financing loan documents;

(ix)

Execution by the mezzanine lender of an inter-creditor agreement in form and substance acceptable to Lender;

(x)

neither Guarantor nor Borrower may be a guarantor of the mezzanine financing;

(xi)

at Lender's option, if required by the procedures promulgated by any rating agency(s) associated with a securitization transaction, evidence in writing to the effect that such mezzanine financing will not result in a re-qualification, reduction or withdrawal of any rating in effect immediately prior to the obtaining of the mezzanine financing issued in connection with the applicable securitization transaction;

(xii)

Borrower pays to Lender a reasonable fee for the handling and processing of such financing and reimburses Lender for all costs and expenses incurred by Lender, including but not limited to outside counsel fees and costs; and

(xiii)

the right to obtain mezzanine debt is personal to VMS National Properties and any successor borrower directly or indirectly wholly owned by AIMCO REIT and/or AIMCO OP and may not be exercised by any successor or assign of Borrower other than a successor borrower directly or indirectly wholly owned by AIMCO REIT and/or AIMCO OP.

(g)

allow all or any portion of the Premises to be operated as or converted to a cooperative or condominium form of ownership;

(h)

amend, alter, modify, terminate or assign that certain Property Management Agreement by and between Borrower, and NHPMN Management, LP dated January 1, 2003 as amended, now in existence or any subsequent agreement hereafter entered into with respect to the Premises (the "Property Management Agreement");

(i)

permit the property and leasing manager to assign or sell the Property Management Agreement; or

(j)

replace the current property and leasing manager or Property Management Agreement without the prior consent of Lender.

3.

(a)

Borrower shall pay or cause to be paid when due and before any penalty attaches or interest accrues all general taxes, special taxes, assessments (including assessments for benefits from public works or improvements whenever begun or completed), utility charges, water charges, sewer service charges, common area maintenance charges, if any, vault or space charges and all other like charges against or affecting the Premises or against any property or equipment located on the Premises, or which might become a lien on the Premises, and shall, within 15 days following Lender's request, furnish to Lender a duplicate receipt of such payment.  If any such tax, assessment or charge may legally be paid in installments, Borrower may, at its option, pay such tax, assessment or charge in installments.  

(b)

If Borrower desires to contest any tax, assessment or charge relating to the Premises, Borrower may do so by paying the same in full, under protest, in the manner provided by law; provided, however, that

(i)

if contest of any tax, assessment or charge may be made without the payment thereof, and

(ii)

such contest shall have the effect of preventing the collection of the tax, assessment or charge so contested and the sale or forfeiture of the Premises or any part thereof or any interest therein to satisfy the same,

then Borrower may in its discretion and upon the giving of written notice to Lender of its intended action and upon the furnishing to Lender of such security or bond as Lender may require, contest any such tax, assessment or charge in good faith and in the manner provided by law.  All costs and

expenses incidental to such contest shall be paid by Borrower.  In the event of a ruling or adjudication adverse to Borrower, Borrower shall promptly pay such tax, assessment or charge.  Borrower shall indemnify and save harmless the Lender and the Premises from any loss or damage arising from any such contest and shall, if necessary to prevent sale, forfeiture or any other loss or damage to the Premises or to Lender, pay such tax, assessment or charge or take whatever action is necessary to prevent any sale, forfeiture or loss.  

4.

(a)

Borrower shall at all times keep or cause to be kept in force (i) property insurance insuring all Improvements which now are or hereafter become a part of the Premises for perils covered by a causes of loss-special form insurance policy, including coverage against terrorism and containing replacement cost, ordinance and law and agreed amount endorsements or equivalent coverage; (ii) commercial general liability insurance naming Lender as an additional insured protecting Borrower and Lender against liability for bodily injury or property damage occurring in, on or adjacent to the Premises, with a combined single limit of not less than One Million Dollars ($1,000,000) per occurrence with not less than a Two Million Dollar ($2,000,000) aggregate limit and excess umbrella liability insurance of not less than Fifteen Million Dollars ($15,000,000); (iii) boiler and machinery insurance if the property has a boiler or is an office building; (iv) rental value insurance for the perils specified herein for one hundred percent (100%) of the Rents (including operating expenses, real estate taxes, assessments and insurance costs which are lessee's liability) for a period of twelve (12) months; (v) builders risk insurance during all periods of construction; and (vi) insurance against all other hazards as may be reasonably required by Lender, including, without limitation, insurance against loss or damage by flood.

(b)

All insurance (including deductibles and exclusions) shall be in form, content and amounts reasonably approved by Lender and written by an insurance company or companies approved by Lender and rated A-, class size VIII or better in the most current issue of Best's Insurance Reports and which is licensed to do business in the state in which the Premises are located or a governmental agency or instrumentality approved by Lender.  The policies for such insurance shall have attached thereto standard mortgagee clauses in favor of and permitting Lender to collect any and all proceeds payable thereunder and shall include a 30 day (except for nonpayment of premium, in which case, a 10 day) notice of cancellation clause in favor of Lender.  All certificates of insurance (or duplicate originals of policies if requested by Lender) shall be delivered to and held by Lender as further security for the payment of the Note and any other ob ligations arising under the Loan Documents, with evidence of renewal coverage delivered to Lender at least 30 days before the expiration date of

any policy.  Borrower shall not carry or permit to be carried separate insurance, concurrent in kind or form and contributing in the event of loss, with any insurance required in the Loan Documents.

5.

(a)

Upon the occurrence of an Event of Default, Borrower shall deposit with and pay to Lender, on each payment date specified in the Note, sums calculated by Lender for payment of the following as they become due and payable:  (i) the estimated taxes and assessments assessed or levied against the Premises, and (ii) the estimated premiums for insurance required by the Loan Documents, excluding commercial general liability insurance.  Lender shall use such deposits to pay the taxes, assessments and premiums when the same become due.  Borrower shall procure and deliver to Lender, in advance, statements for such charges.  If the total payments made by Borrower under this paragraph exceed the amount of payments actually made by Lender for taxes, assessments and insurance premiums, such excess shall be credited by Lender on subsequent deposits to be made by Borrower.  If, however, the deposits are insufficient to pay t he taxes, assessments and insurance premiums when the same shall be due and payable, Borrower will pay to Lender any amount necessary to make up the deficiency, five (5) business days before the date when payment of such taxes, assessments and insurance premiums shall be due.  If at any time Borrower shall tender to Lender, in accordance with the provisions of the Note secured by this Deed of Trust, full payment of the entire Indebtedness represented thereby, Lender shall, in computing the amount of such Indebtedness, credit to the account of Borrower any balance remaining in the funds accumulated and held by Lender under the provisions of this paragraph.  If there is an Event of Default resulting in a public sale of the Premises, or if Lender otherwise acquires the Premises after an Event of Default, Lender shall apply, at the time of commencement of such proceedings, or at the time the Premises is otherwise acquired, the balance then remaining in the funds accumulated under this paragraph as a cr edit toward any delinquent or accrued taxes and then in such priority as Lender elects to the other Indebtedness.

(b)

Any funds held under this paragraph shall not constitute any deposit or account of the Borrower or moneys to which the Borrower is entitled upon demand, or upon the mere passage of time.  Lender shall not be required to segregate such deposits and may hold such deposits in its general account or any other account and may commingle such deposits with any other moneys of Lender or moneys which Lender is holding on behalf of any other person or entity.

6.

In the event of any damage to or destruction of the Premises, or any part thereof:

(a)

Borrower will immediately notify Lender thereof in the manner provided in this Deed of Trust for the giving of notices.  Lender shall have the right (which may be waived by Lender in writing) to settle and adjust any claim under such insurance policies required to be maintained by Borrower.  In all circumstances, the proceeds thereof shall be paid to Lender and Lender is authorized to collect and to give receipts therefor.  Borrower agrees and acknowledges that such proceeds shall be held by Lender without any allowance of interest and that in any bankruptcy proceeding of Borrower, all such proceeds shall be deemed to be "Cash Collateral" as that term is defined in Section 363 of the Bankruptcy Code.  Provided that no Event of Default exists, Borrower shall have the right to participate in any settlement or adjustment; provided, however, that any settlement or adjustment where the aggregate amount of suc h proceeds equals or exceeds $500,000 shall be subject to the written approval of Lender, not to be unreasonably withheld.

(b)

Such proceeds, after deducting therefrom any reasonable expenses incurred by Lender in the collection thereof (including but not limited to reasonable attorneys' fees and costs), shall be applied by Lender to pay the Indebtedness secured hereby including, but not limited to the Make Whole Premium, whether or not then due and payable, provided, however, that if no Event of Default exists at the time of such application or the application occurs during the Open Period, no Make Whole Premium shall be due.

Notwithstanding anything hereinabove to the contrary,

(i)

in the event the casualty occurs more than three (3) months prior to the Maturity Date and no Event of Default exists, Lender shall apply such proceeds as follows:

(A)

If the aggregate amount of such proceeds is less than $500,000, Lender shall pay such proceeds directly to Borrower, to be held in trust for Lender and applied to the cost of rebuilding and restoring the Premises.

(B)

If the aggregate amount of such proceeds equals or exceeds $500,000 Lender shall disburse such amounts of the proceeds as Lender reasonably deems necessary for the repair or replacement of the Premises, subject to the conditions set forth in 6(c) below.

(ii)

in the event (x) an Event of Default exists, or (y) the casualty occurs during the last three (3) months prior to the Maturity Date and Lender determines that the repair and restoration of such casualty cannot be completed prior to the Maturity Date, or (z) the

conditions set forth in 6(c) are not met, then Lender, in its sole and absolute discretion may either:

(A)

declare the entire Indebtedness to be immediately due and payable, provided, however, that if no Event of Default exists or the loan term is in the Open Period, no Make Whole Premium shall be due.  All proceeds shall be applied toward payment of the Indebtedness in such priority as Lender elects; or

(B)

disburse such proceeds as Lender reasonably deems necessary for the repair or replacement of the Premises subject to those conditions set forth in 6(c) which Lender in its sole and absolute discretion may require.

(c)

(i)

In the event that Borrower is to be reimbursed out of the insurance proceeds or out of any award or payment received with respect to a Taking, Lender shall from time to time make available such proceeds, subject to the following conditions: (a) there continues to exist no Event of Default; (b) the delivery to Lender of satisfactory evidence of the estimated cost of completion of such repair and restoration work and any architect's certificates, waivers of lien, contractor's sworn statements, and other evidence of cost and of payment and of the continued priority of the lien hereof over any potential liens of mechanics and materialmen (including, without limitation, title policy endorsements) as Lender may reasonably require and approve; (c) the time required to complete the repair and restoration work and for the income from the Premises to return to the level it was prior to the loss will not exceed the coverage period of the rental value insurance required hereunder; (d) the annual net operating income shall equal or exceed 1.20 times the annual debt service on the Note.  Only net operating income from approved executed Leases in effect on the Premises, with no uncured defaults, shall be used in Lender's determination of the annual net operating income; (e) Lender approves the plans and specifications of such work before such work is commenced if the estimated cost of rebuilding and restoration exceeds 25% of the Indebtedness or involves any structural changes or modifications, which approval shall not be unreasonably withheld; (f) if the amount of any insurance proceeds, award or other payment is insufficient to cover the cost of restoring and rebuilding the Premises, Borrower shall pay such cost in excess of such proceeds, award or other payment before being entitled to reimbursement out of such funds; (g) Borrower pays to Lender a non-refundable processing fee equal to the greater of $5,000.00 or .25% of the

amount of such proceeds within sixty (60) days of the occurrence of any such damage or destruction and before Lender disburses any proceeds; and (h) such other conditions to such disbursements, in Lender's reasonable discretion, as would be customarily required by a construction lender doing business in the area where the Premises is located or which are otherwise required by any rating agency rating a securitization transaction with respect to the Loan.

(ii)

No payment made by Lender prior to the final completion of the repair or restoration work shall, together with all payments theretofore made, exceed 90% of the cost of such work performed to the time of payment, and at all times the undisbursed balance of said proceeds shall be at least sufficient to pay for the cost of completion of such work free and clear of all liens.  Any proceeds remaining after payment of the cost of rebuilding and restoration shall be paid to Borrower so long as no Event of Default has occurred and is continuing.

(iii)

Repair and restoration of the Premises shall be commenced promptly after the occurrence of the loss and shall be prosecuted to completion diligently, and the Premises shall be so restored and rebuilt to substantially the same character and quality as prior to such damage and destruction and shall comply with all Legal Requirements.

(d)

Should such damage or destruction occur after foreclosure or sale proceedings have been instituted, the proceeds of any such insurance policy or policies, if not applied in rebuilding or restoration of the Improvements, shall be used to pay (i) the Indebtedness then due and owing in the event of a non-judicial sale in such priority as Lender elects, or (ii) the amount due in accordance with any decree of foreclosure or deficiency judgment that may be entered in connection with such proceedings, and the balance, if any, shall be paid to the owner of the equity of redemption if it shall then be entitled to the same, or otherwise as any court having jurisdiction may direct.

7.

In the event of the commencement of a Taking affecting the Premises:

(a)

Borrower shall notify Lender thereof in the manner provided in this Deed of Trust for the giving of notices.  Lender may participate in such proceeding, and Borrower shall deliver to Lender all documents requested by it to permit such participation.

(b)

Borrower shall cause the proceeds of any award or other payment made relating to a Taking, to be paid directly to Lender.  Lender, in its sole and

absolute discretion: (i) may apply all such proceeds to pay the Indebtedness in such priority as Lender elects, provided however, that if no Event of Default exists at the time of such application no Make Whole Premium shall be due; or (ii) subject to and in accordance with the provisions set forth in paragraph 6(c) above, may disburse such amounts of the proceeds as Lender reasonably deems necessary for the repair or replacement of the Premises.

Notwithstanding anything herein above to the contrary, provided no Event of Default exists, Lender agrees to disburse the proceeds received from any Inconsequential Taking, as hereinafter defined, to Borrower for the repair and/or replacement of the Premises.  An Inconsequential Taking shall be a Taking which (i) results in less than $100,000 in proceeds; (ii) does not, in Lender's determination, materially or adversely affect the Improvements, parking, access, ingress, egress or use of the Premises; and (iii) does not trigger any rights or options of tenants under the Leases.   

8.

If by the laws of the United States of America or of any state or governmental subdivision having jurisdiction over Borrower or of the Premises or of the Loan evidenced by the Loan Documents or any amendments or modifications thereof, any tax or fee is due or becomes due or is imposed upon Lender in respect of the issuance of the Note hereby secured or the making, recording and registration of this Deed of Trust or otherwise in connection with the Loan Documents, the Environmental Indemnity or the Loan, except for Lender's income or franchise tax, Borrower covenants and agrees to pay such tax or fee in the manner required by such law, and to hold harmless and indemnify Trustee and Lender, their successors and assigns, against any liability incurred by reason of the imposition of any such tax or fee.  

9.

(a)

Upon the occurrence of any Event of Default, Lender may, but need not, make any payment or perform any act herein required of Borrower, in any form and manner deemed expedient and may, but need not, make full or partial payments of principal or interest on prior encumbrances, if any, and purchase, discharge, compromise or settle any tax lien or other prior lien or title or claim thereof, or redeem from any tax sale or forfeiture affecting said Premises, or contest any tax or assessment.  All moneys paid for any of the purposes herein authorized and all reasonable expenses paid or incurred in connection therewith, including but not limited to, reasonable attorneys' fees and costs and reasonable attorneys' fees and costs on appeal, and any other money advanced by Lender to protect the Premises and the lien hereof, shall be so much additional Indebtedness secured hereby and shall become immediately due and payable without notice an d with interest thereon at the Default Rate from the date of expenditure or advance until paid.  

(b)

In making any payment hereby authorized relating to taxes or assessments or for the purchase, discharge, compromise or settlement of any prior lien, Lender may make such payment according to any bill, statement or estimate secured from the appropriate public office without inquiry into the accuracy thereof or into the validity of any tax, assessment, sale, forfeiture, tax lien or title or claim thereof or without inquiry as to the validity or amount of any claim for lien which may be asserted.  

10.

If one or more of the following events (herein called an "Event of Default" or "Events of Default" as the context so requires) shall have occurred:  

(a)

failure to pay when due any principal, interest, Make Whole Premium or other Indebtedness, utilities, taxes or assessments or insurance premiums required pursuant to the Loan Documents or the Environmental Indemnity, and such failure shall have continued for 5 days; or

(b)

Borrower, Interest Owner or any guarantor voluntarily brings or acquiesces to any of the following:  (A) any action for dissolution, act of dissolution or dissolution or the like of Borrower, Interest Owner or any guarantor under the Federal Bankruptcy Code as now or hereafter constituted; (B) the filing of a petition or answer proposing the adjudication of Borrower, Interest Owner or any guarantor as a bankrupt or its reorganization or arrangement, or any composition, readjustment, liquidation, dissolution or similar relief with respect to it pursuant to any present or future federal or state bankruptcy or similar law; or (C) the appointment by order of a court of competent jurisdiction of a receiver, trustee or liquidator of the Premises or any part thereof or of Borrower, Interest Owner or any guarantor or of substantially all of the assets of Borrower, Interest Owner or any guarantor; or

(c)

one or more of the items set forth in paragraph 10(b) above occur which were either not (i) voluntarily brought by Borrower, Interest Owner or any guarantor or (ii) acquiesced in by Borrower, Interest Owner or any guarantor, and which are not discharged or dismissed within 90 days after the action, filing or appointment, as the case may be; or

With respect to the matters in (b) and (c) above for an Interest Owner only, no Event of Default shall occur until an interested party or Interest Owner asserts a claim or right against Borrower or the Premises which delays or otherwise affects Lender's rights, remedies, or interests granted under the Loan Documents (whether or not such assertion is successful).

(d)

with respect to the matters not described in the other subparagraphs of this paragraph 10, failure to duly observe or perform any covenant, condition or agreement of the Borrower or any guarantor contained in this Deed of

Trust, the Guaranty, the Note or the Assignment of Leases from Borrower to Lender or in any other instrument or agreement which evidences or secures the Loan (the "Loan Documents"), or in the Environmental Indemnity, and such failure shall have continued for 30 days after Notice specifying such failure is given by Lender to Borrower; or

If any failure to observe or perform under (d) above shall be of such nature that it cannot be cured or remedied within 30 days, Borrower shall be entitled to a reasonable period of time to cure or remedy such failure (not to exceed 90 days following the giving of Notice), provided Borrower commences the cure or remedy thereof within the 30 day period following the giving of Notice and thereafter proceeds with diligence, as determined by Lender, to complete such cure or remedy.  

With respect to the matters in (d), no Event of Default shall occur if the failure to observe or perform will not have a Material Adverse Effect as such term is defined below.

"Material Adverse Effect" means a material adverse effect upon (i) the business or the financial position or results of operation of Borrower, (ii) the ability of Borrower to perform, or of Lender to enforce, any of the Loan Documents or Environmental Indemnity or (iii) the value of (x) the Collateral taken as a whole or (y) the Premises.

(e)

the failure of Borrower to duly observe or perform any of the covenants, conditions and agreements of the Borrower contained in paragraph 2(f) of this Deed of Trust and to cure such failure within ten (10) days following Borrower’s receipt of Notice of such failure; provided, however, that Borrower shall only be granted said 10 day cure period if the failure to observe or perform is a curable event and the granting of said cure period will not have a Material Adverse Effect; or

(f)

any representation when made by or on behalf of Borrower, Interest Owner or any guarantor regarding the Premises, the making or delivery of any of the Loan Documents or the Environmental Indemnity or in any material written information provided by or on behalf of Borrower, Interest Owner or any guarantor in connection with the Loan shall prove to be untrue or inaccurate in any material respect; or

(g)

the failure of Borrower to give Notice to Lender within 90 days after the death of any individual who is personally liable for any obligation under the Loan Documents or the Environmental Indemnity, as Borrower, indemnitor or guarantor, whether or not such individual had executed the Note or this Deed of Trust; or

(h)

subject to the provisions of paragraph 2(f), the failure of Borrower to provide Lender with an assumption agreement in form and substance and executed by a person(s) or entity(ies) acceptable to Lender in its sole discretion to assume the obligations of any deceased individual who is personally liable for any obligation under the Loan Documents or the Environmental Indemnity, as Borrower, indemnitor or guarantor, whether or not such individual had executed the Note or this Deed of Trust, and such failure shall have continued for 90 days after the death of such individual; or

then, in each and every such case, the whole of said principal sum hereby secured shall, at the option of the Lender and without further notice to Borrower, become immediately due and payable together with accrued interest thereon, a Make Whole Premium calculated in accordance with the provisions of the Loan Documents and all other Indebtedness, and whether or not Lender has exercised said option, interest shall accrue on the entire principal balance and any interest or Make Whole Premium or other Indebtedness then due, at the Default Rate until fully paid or if Lender has not exercised said option, for the duration of any Event of Default.  

11.

Borrower agrees that if Lender accelerates the whole or any part of the principal sum hereby secured after the occurrence of an Event of Default but outside of the Open Periods, that Borrower shall pay as yield maintenance protection and not as a penalty, a "Make Whole Premium", as defined in the Note.

12.

(a)

Borrower, in accordance with the provisions of the General Laws of the State of Maryland, the Maryland Rules of Procedure, or any other general or local laws of the State of Maryland relating to mortgages and deeds of trusts, including any amendments, supplements, or additions thereto, does hereby:  (1) declare his assent to the passing of a decree for the sale of the Premises at any time after the recording of this Deed of Trust, such sale to take place after a default has occurred in any of the covenants and conditions of this Deed of Trust, as herein provided; (2) authorize the Trustees or its duly authorized attorney, after any such default shall have occurred, to sell the Premises.  Such sale may be of the Premises as a whole and it shall not be the duty of the party selling to sell the same in parts or in lots but such party may do so.  The sale shall be made after publishing notice of time, place and terms of sa le at least once a week for three (3) successive weeks, the first publication shall be given not less than 15 days prior to sale and the last publication not more than one (1) week prior to sale, in a newspaper of general circulation in the county where the foreclosure action is pending.  The party selling shall also give such other notice as required by law and as he may deem expedient; and the terms of

the sale may be all cash on ratification of the sale or such other terms as the party selling may deem expedient.

(b)

Trustee may postpone such sale from time to time by giving notice of such postponement in the same manner in which any original notice of sale was given or by an announcement or proclamation made to the persons assembled at the time and place previously appointed and noticed for such sale or postponed sale, and on the date of such sale or the date to which such sale may have been postponed Trustee may sell the Premises to the highest bidder.  Lender or its agents may bid and purchase at such sale.  Trustee in conducting said sale may act either in person or through the agency of an auctioneer and may establish as one of the conditions of such sale that all bids and payments for said Premises be made in cash. In addition to the foregoing, the Trustee is hereby authorized to disclose in any public notice of sale that such sale of the Premises shall be made subject to one or more of the tenancies entered into subsequent to the recording of this Deed of Trust, or otherwise subordinated thereto, in accordance with the provisions of Maryland Annotated Code Real Property Section 7 - 105(f)(2), as may be amended from time to time.

13.

Upon such sale, Trustee shall make, execute, and after due payment is made, deliver to the purchaser or purchasers a deed or deeds for the Premises or part thereof sold.  On any sale of the Premises hereunder, whether under the above assent to a decree or under the above power of sale or otherwise, the proceeds of sale shall be applied as follows:  first to the payment of all expenses incident to the sale, including attorneys' fees and costs rendered to the Trustee in connection with its duties hereunder and any commission due any auctioneer which calls the sale (not to exceed the maximum amount permitted by law or rule); and also a commission to the party making the sale equal to the greater of (i) 5% of the successful bid amount, or (ii) the commission allowed Trustees for making sales of property under a decree of court of equity in the State of Maryland; second, to the payment of all claims of Lender hereunder, whether t he same shall have been matured or not including interest thereon until final ratification of the auditor's report; and third, the balance, if any, to Borrower.  It is agreed that half of the above commissions and all of the above costs and expenses shall be paid by Borrower in the event the mortgage debt is paid in full after any advertisement of the Premises but before any sale thereof.

14.

In the event of such a sale of the Premises or any part thereof and the execution of a deed or deeds therefor under these trusts, any recital therein of the occurrence of an Event of Default or of the giving or recording of any notice or demand by Trustee or Lender regarding such sale shall be conclusive proof thereof, and the receipt of the purchase money recited therein shall fully discharge the purchaser

from any obligation for the proper application of the proceeds of sale in accordance with these trusts.

15.

Following the occurrence of an Event of Default, unless the same has been specifically waived in writing, Borrower shall forthwith upon demand of Trustee or Lender surrender to Lender possession of the Premises, and Lender shall be entitled to take actual possession of the Premises or any part thereof personally or by its agents or attorneys, and Lender in its discretion may, with or without force and with or without process of law, enter upon and take and maintain possession of all or any part of the Premises together with all documents, books, records, papers and accounts of the Borrower or the then owner of the Premises relating thereto, and may exclude Borrower, its agents or assigns wholly therefrom, and may as attorney-in-fact or agent of the Borrower, or in its own name as Lender and under the powers herein granted:

(a)

hold, operate, maintain, repair, rebuild, replace, alter, improve, manage or control the Premises as it deems judicious, insure and reinsure the same and any risks related to Lender's possession, operation and management thereof and receive all Rents, either personally or by its agents, and with full power to use such measures, legal or equitable, as in its discretion it deems proper or necessary to enforce the payment or security of the Rents, including actions for the recovery of Rent, actions in forcible detainer and actions in distress for Rents, hereby granting full power and authority to exercise each and every of the rights, privileges and powers herein granted at any and all times hereafter, without notice to Borrower; and

(b)

conduct leasing activity pursuant to the provisions of the Assignment of Leases.

Neither Trustee nor Lender shall be obligated to perform or discharge, nor does either hereby undertake to perform or discharge, any obligation, duty or liability under any Lease.  Except to the extent that the same is caused solely by Lender's gross negligence or willful misconduct, should Trustee or Lender incur any liability, loss or damage under any Leases, or under or by reason of the Assignment of Leases, or in the defense of any claims or demands whatsoever which may be asserted against Lender or Trustee by reason of any alleged obligations or undertakings on its part to perform or discharge any of the terms, covenants or agreements in any Lease, the amount thereof, including costs, expenses and reasonable attorneys' fees and costs, including reasonable attorneys' fees and costs on appeal, shall be added to the Indebtedness and secured hereby.

16.

Upon the occurrence of an Event of Default, Trustee and Lender in the exercise of the rights and powers conferred upon them shall have the full power to use and apply the Rents, less costs and expenses of collection to the payment of or on

account of the items listed in (a) - (c) below, at the election of Lender and in such order as Lender may determine as follows:

(a)

to the payment of (i) the expenses of operating and maintaining the Premises, including, but not limited to the cost of management, leasing (which shall include reasonable compensation to Trustee, Lender and their respective agent or agents if management and/or leasing is delegated to an agent or agents), repairing, rebuilding, replacing, altering and improving the Premises, (ii) premiums on insurance as hereinabove authorized, (iii) taxes and special assessments now due or which may hereafter become due on the Premises, and (iv) expenses of placing the Premises in such condition as will, in the sole judgment of Lender, make it readily rentable;

(b)

to the payment of any principal, interest or any other Indebtedness secured hereby or any deficiency which may result from any foreclosure sale;

(c)

to the payment of established claims for damages, if any, reasonable attorneys' fees and costs and reasonable attorneys' fees and costs on appeal.

The manner of the application of Rents, the reasonableness of the costs and charges to which such Rents are applied and the item or items which shall be credited thereby shall be within the sole and unlimited discretion of Lender.  To the extent that the costs and expenses in (a) and (c) above exceed the amounts collected, the excess shall be added to the Indebtedness and secured hereby.

17.

Upon the occurrence of any Event of Default, unless the same has been specifically waived in writing, Lender may apply to any court having jurisdiction for the appointment of a receiver of the Premises.  Such appointment may be made either before or after sale, without notice, without regard to the solvency or insolvency of Borrower at the time of application for such receiver and without regard to the then value of the Premises or the adequacy of Lender's security.  Lender may be appointed as such receiver.  The receiver shall have power to collect the Rents during the pendency of any foreclosure proceedings and, in case of a sale, during the full statutory period of redemption, if any, as well as during any further times when Borrower, except for the intervention of such receiver, would be entitled to collect such Rents.  In addition, the receiver shall have all other powers which shall be necessary or are usual in such cases for the protection, possession, control, management and operation of the Premises during the whole of said period.  The court from time to time may authorize the receiver to apply the net income in its possession at Lender's election and in such order as Lender may determine in payment in full or in part of those items listed in paragraph 16.

18.

(a)

Borrower agrees that all reasonable costs, charges and expenses, including but not limited to, reasonable attorneys' fees and costs, incurred or

expended by Trustee or Lender arising out of or in connection with any action, proceeding or hearing, legal, equitable or quasi-legal, including the preparation therefor and any appeal therefrom, in any way affecting or pertaining to the Loan Documents, the Environmental Indemnity, or the Premises, shall be promptly paid by Borrower.  All such sums not promptly paid by Borrower shall be added to the Indebtedness secured hereby and shall bear interest at the Default Rate from the date of such advance and shall be due and payable on demand.

(b)

Borrower hereby agrees that upon the occurrence of an Event of Default and the acceleration of the principal sum secured hereby pursuant to this Deed of Trust, to the full extent that such rights can be lawfully waived, Borrower hereby waives and agrees not to insist upon, plead, or in any manner take advantage of, any notice of acceleration, any stay, extension, exemption, homestead, marshaling or moratorium law or any law providing for the valuation or appraisement of all or any part of the Premises prior to any sale or sales thereof under any provision of this Deed of Trust or before or after any decree, judgment or order of any court or confirmation thereof, or claim or exercise any right to redeem all or any part of the Premises so sold and hereby expressly waives to the full extent permitted by applicable law on behalf of itself and each and every person or entity acquiring any right, title or interest in or to all or any part of the Premises, all benefit and advantage of any such laws which would otherwise be available to Borrower or any such person or entity, and agrees that neither Borrower nor any such person or entity will invoke or utilize any such law to otherwise hinder, delay or impede the exercise of any remedy granted or delegated to Lender herein but will permit the exercise of such remedy as though any such laws had not been enacted.  Borrower hereby further expressly waives to the full extent permitted by applicable law on behalf of itself and each and every person or entity acquiring any right, title or interest in or to all or any part of the Premises any and all rights of redemption from any sale or any order or decree of foreclosure obtained pursuant to provisions of this Deed of Trust.

19.

In accordance with and subject to the terms and conditions of the Assignment of Leases, Borrower hereby assigns to Lender directly and absolutely, and not merely collaterally, the interest of Borrower as lessor under the Leases of the Premises, and the Rents payable under any Lease and/or with respect to the use of the Premises, or portion thereof, including any oil, gas or mineral lease, or any installments of money payable pursuant to any agreement or any sale of the Premises or any part thereof, subject only to a license, if any, granted by Lender to Borrower with respect thereto prior to the occurrence of an Event of Default.  Borrower has executed and delivered the Assignment of Leases which grants to Lender specific rights and remedies in respect of said Leases and governs the

collection of Rents thereunder and from the use of the Premises, and such rights and remedies so granted shall be cumulative of those granted herein.  

The collection of such Rents and the application thereof as aforesaid shall not cure or waive any Event of Default or notice of default hereunder or invalidate any act done pursuant to such notice, except to the extent any such Event of Default is fully cured.  Failure or discontinuance of Lender at any time, or from time to time, to collect any such moneys shall not impair in any manner the subsequent enforcement by Lender of the right, power and authority herein conferred on Lender.  Nothing contained herein, including the exercise of any right, power or authority herein granted to Lender, shall be, or be construed to be, an affirmation by Lender of any tenancy, Lease or option, or right to possession otherwise, or an assumption of liability under, or the subordination of the lien or charge of this Deed of Trust to any such tenancy, Lease or option or right to possession otherwise.  Borrower hereby agrees that, in the event Lender exercises its rights as provided for in this paragraph or in the Assignment of Leases, Borrower waives any right to compensation for the use of Borrower's furniture, furnishings or equipment in the Premises for the period such assignment of rents or receivership is in effect, it being understood that the Rents derived from the use of any such items shall be applied to Borrower's obligations hereunder as above provided.  

20.

All rights and remedies granted to Trustee or Lender in the Loan Documents shall be in addition to and not in limitation of any rights and remedies to which it is entitled in equity, at law or by statute, and the invalidity of any right or remedy herein provided by reason of its conflict with applicable law or statute shall not affect any other valid right or remedy afforded to Trustee or Lender.  No waiver of any default or Event of Default under any of the Loan Documents shall at any time thereafter be held to be a waiver of any rights of the Trustee or Lender hereunder, nor shall any waiver of a prior Event of Default or default operate to waive any subsequent Event of Default or default.  All remedies provided for in the Loan Documents are cumulative and may, at the election of Lender, be exercised alternatively, successively or concurrently.  No act of Trustee or Lender shall be construed as an election to proceed under any one provision herein to the exclusion of any other provision or to proceed against one portion of the Premises to the exclusion of any other portion.  Time is of the essence under this Deed of Trust and the Loan Documents.

21.

By accepting payment of any sum secured hereby after its due date, Lender does not waive its right either to require prompt payment when due of all other sums or installments so secured or to declare a default for failure to pay such other sums or installments.

22.

The usury provisions of paragraph 6 of the Note and the liability provisions of paragraph 9 of the Note are fully incorporated herein by reference as if the same were specifically stated here.

23.

In the event one or more provisions of the Loan Documents shall be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision hereof, and the Loan Documents shall be construed as if any such provision had never been contained herein.  

24.

If the payment of the Indebtedness secured hereby or of any part thereof shall be extended or varied, or if any part of the security be released, all persons now or at any time hereafter liable therefor, or interested in said Premises, shall be held to assent to such extension, variation or release, and their liability and the lien and all provisions hereof shall continue in full force, the right of recourse against all such persons being expressly reserved by Lender notwithstanding such variation or release.  

25.

Upon payment in full of the principal sum, interest and other Indebtedness secured by the Loan Documents, these presents shall be null and void, and Trustee shall release this Deed of Trust and the lien hereof by proper instrument executed in recordable form.  

26.

(a)

Borrower hereby grants to Lender and its respective agents, attorneys, employees, consultants, contractors and assigns an irrevocable license and authorization to enter upon and inspect the Premises and all facilities located thereon at reasonable times.

(b)

In connection with any sale or conveyance of this Deed of Trust, Borrower grants to Lender and its respective agents, attorneys, employees, consultants, contractors and assigns an irrevocable license and authorization to conduct, at Lender's expense, a Phase I environmental audit of the Premises.

(c)

In the event there has been an Event of Default or in the event Lender has formed a reasonable belief, based on its inspection of the Premises or other factors known to it, that Hazardous Materials may be present on the Premises, then Borrower grants to Lender and its respective agents, attorneys, employees, consultants, contractors and assigns an irrevocable license and authorization to conduct environmental tests of the Premises, including without limitation, a Phase I environmental audit, subsurface testing, soil and ground water testing, and other tests which may physically invade the Premises or facilities (the "Tests").  The scope of the Tests shall be such as Lender, in its sole but reasonable discretion, determines is necessary to (i) investigate the condition of the Premises, (ii) protect the security interests created under this Deed of Trust, or (iii) determine compliance with Environmental Laws, the provisions of the Loan Documents and the Environmental Indemnity and other matters relating

thereto.  Borrower shall pay the reasonable costs of the Tests and upon Borrower’s request, Lender will make available to Borrower the result of the Tests.

(d)

Provided no Event of Default has occurred, Lender will provide Borrower with reasonable notice of Lender's intent to enter, inspect and conduct the Tests provided for in this paragraph.  In addition, Lender shall conduct such inspections and Tests during normal business hours and use reasonable efforts to minimize disruption of lessees' business operations.

The foregoing licenses and authorizations are intended to be a means of protection of Lender's security interest in the Premises and not as participation in the management of the Premises.

27.

Within 15 days after any written request by any party to this Deed of Trust, the requested party shall certify, by a written statement duly acknowledged, the amount of principal, interest and other Indebtedness then owing on the Note, the terms of payment, Maturity Date and the date to which interest has been paid.  Borrower shall further certify whether any defaults, offsets or defenses exist against the Indebtedness secured hereby.  

28.

(a)

Borrower shall furnish to Lender within 120 days after the end of each fiscal year of Borrower, a statement of income and expenses for Borrower’s operation of the Premises for that fiscal year, a statement of changes in financial position of Borrower relating to the Premises for that fiscal year and, when requested by Lender, a balance sheet showing all assets and liabilities of Borrower relating to the Premises as of the end of that fiscal year;

(b)

Borrower shall furnish to Lender within 120 days after the end of each fiscal year of Borrower, and at any other time upon Lender’s request, a rent schedule for the Premises showing the name of each tenant, and for each tenant, the space occupied, the lease expiration date, the rent payable for the current month, the date through which rent has been paid, and any related information requested by Lender;

(c)

Borrower shall furnish to Lender within 120 days after the end of each fiscal year of Borrower, and at any other time upon Lender’s request, an accounting of all security deposits held pursuant to all Leases, including the name of the institution (if any) and the names and identification numbers of the accounts (if any) in which such security deposits are held and the name of the person to contact at such financial institution, along with any authority or release necessary for Lender to access information regarding such accounts;

(d)

upon Lender’s request, a balance sheet, a statement of income and expenses for Borrower, a statement of changes in financial position of Borrower for Borrower’s most recent fiscal year, an aged account receivables report and an annual budget; and

(e)

if required by Lender, a statement of income and expense for the Premises for the prior month or quarter.

(f)

Each of the statements, schedules and reports required by Section 28 shall be certified to be complete and accurate by an individual having authority to bind Borrower, and shall be in such form and contain such detail as Lender may reasonably required.  If an Event of Default has occurred and is continuing, Lender may require that the financial statements required by Sections 28(a), 28(b) and 28(c) be audited, but may not require that any other financial statements required by Section 28 be audited.  Certification of a statement by the chief financial officer of the entity that is the subject of the statement or, in the case of a partnership, the chief financial officer of the general partner, will be acceptable to Lender as certification by an individual having authority to bind Borrower.

29.

Each notice, consent, request, report or other communication under this Deed of Trust or any other Loan Document (each a "Notice") which any party hereto may desire or be required to give to the other shall be deemed to be an adequate and sufficient notice if given in writing and service is made by either (i) registered or certified mail, postage prepaid, in which case notice shall be deemed to have been received three (3) business days following deposit to U.S. mail; or (ii) nationally recognized overnight air courier, next day delivery, prepaid, in which case such notice shall be deemed to have been received one (1) business day following delivery to such nationally recognized overnight air courier.  All Notices shall be addressed to Borrower at its address given on the first page hereof, or to Lender at c/o Principal Real Estate Investors, LLC, 801 Grand Avenue, Des Moines, Iowa 50392-1450, Attn:  Commerc ial Real Estate Servicing, Loan No. 755500, or to such other place as any party may by written notice to the other parties hereafter designate as a place for service of notice.  Borrower shall not be permitted to designate more than one place for service of Notice concurrently.

30.

Lender, from time to time, may substitute another Trustee in place of the Trustee named herein, to execute the trusts hereby created; and upon such appointment, and without conveyance to the successor trustee, the successor trustee shall be vested with all the title, interest, powers, duties and trusts in the Premises hereby vested in or conferred upon Trustee herein named.  Each such appointment and substitution shall be made by written instrument executed by the Lender containing reference to this Deed of Trust sufficient to identify it, which instrument, when recorded in the office of the County Recorder of the county or counties in which the Premises is situated, shall be conclusive proof of proper

appointment of the successor trustee.  The recital or statement, in any instrument executed by Trustee in pursuance of any of said trusts, of the due authorization of any agent of the Trustee executing the same shall for all purposes be conclusive proof of such authorization.  

31.

Trustee at any time, at Trustee's option, may commence and maintain suit in any court of competent jurisdiction and obtain the aid and direction of said court in the execution by it of the trusts or any of them, herein expressed or contained, and, in such suit, may obtain the orders or decrees, interlocutory or final of said court directing the execution of said trusts, and confirming and approving Trustee's acts, or any of them, or any sales or conveyances made by Trustee, and adjudging the validity thereof, and directing that the purchasers of the property sold and conveyed be let into immediate possession thereof, and providing for orders of court or other process requiring the Sheriff of the county in which said property is situated to place and maintain said purchasers in quiet and peaceable possession of the property so purchased by them, and the whole thereof.  

32.

Borrower has had the opportunity to fully negotiate the terms hereof and modify the draftsmanship of the Loan Documents and the Environmental Indemnity.  Therefore, the terms of the Loan Documents and the Environmental Indemnity shall be construed and interpreted without any presumption, inference, or rule requiring construction or interpretation of any provision of the Loan Documents and the Environmental Indemnity against the interest of the party causing the Loan Documents and the Environmental Indemnity or any portion of it to be drafted.  Borrower is entering into the Loan Documents and the Environmental Indemnity freely and voluntarily without any duress, economic or otherwise.

33.

Borrower, forthwith upon request, at any and all times hereafter, at the expense of Borrower, will cause to be made, executed, acknowledged and delivered to Trustee, any and every deed or assurance in law which Trustee or counsel of Trustee shall reasonably advise or require for the more sure, effectual and satisfactory granting and confirming of said Premises unto Trustee.  

34.

Trustee shall not be liable or responsible for its acts or omissions hereunder, except for Trustee's own gross negligence or willful default, or be liable or responsible for any acts or omissions of any agent, attorneys or employee by him employed hereunder, if selected with reasonable care.  

35.

Trustee accepts this trust when this Deed of Trust executed and acknowledged is made a public record as provided by law.  Trustee is not obligated to notify any party hereto of pending sale under any other deed of trust or of any action or proceeding in which Borrower, Lender, or Trustee shall be a party unless brought by Trustee.  

36.

This Deed of Trust and all provisions hereof shall inure to the benefit of the heirs, successors and assigns of Lender and shall bind the heirs and permitted successors and assigns of Borrower.  

37.

This Deed of Trust shall be governed by, and construed in accordance with, the laws of the state of California, without regard to its conflicts of law principles.

38.

As used herein, the term "Default Rate" means a rate equal to the lesser of (i) four percent (4%) per annum above the then applicable interest rate payable under the Note or (ii) the maximum rate allowed by applicable law.

39.

BORROWER AND LENDER EACH KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE, TO THE EXTENT PERMITTED BY LAW, TRIAL BY JURY IN ANY ACTIONS BROUGHT BY BORROWER, TRUSTEE OR LENDER IN CONNECTION WITH THIS DEED OF TRUST, ANY OF THE LOAN DOCUMENTS, THE INDEBTEDNESS SECURED HEREBY, OR ANY OTHER STATEMENTS OR ACTIONS OF LENDER.

40.

This Deed of Trust and the Indebtedness secured hereby is for the sole purpose of conducting or acquiring a lawful business, professional or commercial activity or for the acquisition or management of real or personal property as a commercial investment, and all proceeds of such Indebtedness shall be used for said business or commercial investment purpose.  Such proceeds will not be used for the purchase of any security within the meaning of the Securities Exchange Act of 1934, as amended, or any regulation issued pursuant thereto, including without limitation, Regulations U, T and X of the Board of Governors of the Federal Reserve System.  This is not a purchase money deed of trust where a seller is providing financing to a buyer for the payment of all or any portion of the purchase price, and the Premises secured hereby is not a residence or homestead or used for mining, grazing, agricultural, timber or farming purposes.

41.

Unless Lender shall otherwise direct in writing, Borrower shall appear in and defend all actions or proceedings purporting to affect the security hereunder, or any right or power of the Lender.  The Lender shall have the right to appear in such actions or proceedings.  Borrower shall save Lender harmless from all reasonable costs and expenses, including but not limited to, reasonable attorneys' fees and costs, and costs of a title search, continuation of abstract and preparation of survey incurred by reason of any action, suit, proceeding, hearing, motion or application before any court or administrative body in and to which Lender may be or become a party by reason hereof.  Such proceedings shall include but not be limited to condemnation, bankruptcy, probate and administration proceedings, as well as any other action, suit, proceeding, right, motion or application wherein proof of claim is by law required to be filed or in which it becomes necessary to defend or uphold the terms of this Deed of Trust or the Loan Documents or otherwise purporting to affect the security hereof or the rights or powers of

Lender.  All money paid or expended by Lender in that regard, together with interest thereon from date of such payment at the applicable interest rate shall be additional Indebtedness secured hereby and shall be immediately due and payable by Borrower without notice.

42.

Upon the occurrence of an Event of Default, unless the same has been specifically waived in writing, all Rents collected or received by Borrower shall be accepted and held for Lender in trust and shall not be commingled with the funds and property of Borrower, but shall be promptly paid over to Lender.

43.

If more than one, all obligations and agreements of Borrower are joint and several.

44.

This Deed of Trust may be executed in counterparts, each of which shall be deemed an original; and such counterparts when taken together shall constitute but one agreement.

(Signatures on next page)

IN WITNESS WHEREOF, Borrower has caused this Deed of Trust to be duly executed and delivered as of the date first above written.   

VMS NATIONAL PROPERTIES, an Illinois general partnership

By:

VMS NATIONAL RESIDENTIAL PORTFOLIO I, an Illinois limited partnership

By:

MAERIL, INC., a Delaware

                        corporation, its general partner

       By: /s/Patti K. Fielding

       Name:  Patti K. Fielding

                Title:  Executive Vice President  

                           and Treasurer

By:

VMS NATIONAL RESIDENTIAL PORTFOLIO II, an Illinois limited partnership

By:

MAERIL, INC., a Delaware

                        corporation, its general partner

       By: /s/Patti K. Fielding

       Name:  Patti K. Fielding

                Title:  Executive Vice President  

                           and Treasurer

EX-10

EXHIBIT 10. 33

GUARANTY

755500

THIS GUARANTY (as the same may from time to time hereafter be modified, supplemented or amended, the "Guaranty") is made as of January 19, 2007, by AIMCO PROPERTIES, L.P., a Delaware limited partnership, having an office at Stanford Place 3, 4582 South Ulster Street Parkway, Suite 1100, Denver, Colorado 80237 ("Guarantor"), in favor of PRINCIPAL LIFE INSURANCE COMPANY, an Iowa corporation ("Lender").

RECITALS:

Lender has agreed to make a loan (the "Loan") in the original principal sum of Thirty One Million Eight Hundred Thousand and 00/100 Dollars ($31,800,000.00) (the "Loan Amount") to VMS NATIONAL PROPERTIES, an Illinois general partnership ("Borrower"); and

The Loan is evidenced by Borrower's secured promissory note made payable and delivered to Lender (as the same may from time to time hereafter be modified, amended, supplemented, extended or consolidated in writing, and any note(s) issued in exchange therefor or replacement thereof, the "Note") and further evidenced and secured by a "Mortgage" (it being agreed that "Mortgage" as hereinafter used shall be construed to mean "mortgage" or "deed of trust" or "trust deed" or "deed to secure debt" as the context so requires) on certain real estate located in Prince George’s County, Maryland, together with all existing improvements constructed thereon, said Premises being more particularly described in said Mortgage, and an Assignment of Leases ("Assignment of Leases"); and

In connection with the Loan, the Borrower has also executed that certain Environmental Indemnity ("Environmental Indemnity") for the benefit of Lender (the Note, Environmental Indemnity, Mortgage and Assignment of Leases and all other instruments or agreements by which the Loan is evidenced or secured are hereinafter collectively referred to as the "Underlying Instruments"); and

It is a condition of Lender's agreement to make the Loan that Guarantor be unconditionally liable for and personally guarantee the payment and performance of certain liabilities and obligations of the Borrower under the Underlying Instruments upon the terms and conditions as are hereinafter set forth and except for such liabilities and obligations described herein, Guarantor shall have no liability in connection with, or responsibility to perform, under or in accordance with the Underlying Instruments; and

WHEREAS, Guarantor is financially interested in Borrower and is materially benefited by the consummation of the Loan and has agreed to unconditionally and personally guarantee the payment and performance of certain liabilities and obligations of Borrower under the Underlying Instruments upon the terms and conditions as are hereinafter set forth.

-2-

NOW, THEREFORE, in order to induce Lender to make the Loan to Borrower, Guarantor intending to be legally bound, hereby makes the following representations and warranties to the Lender and hereby covenants and agrees with the Lender as follows:

1.

Guarantor absolutely, irrevocably and unconditionally guarantees to the Lender payment and the full, faithful and timely performance of any and all liabilities and obligations of Borrower whether now existing or hereafter incurred under the Environmental Indemnity and paragraph 9 of the Note (all of which payments, liabilities and obligations are hereinafter collectively referred to as the "Guaranteed Obligations").

2.

Guarantor absolutely, irrevocably and unconditionally waives notice of acceptance of this Guaranty and notice of any payment, liability or obligation to which it may apply, and waives presentment, demand of payment, protest, notice of dishonor or nonpayment of such liabilities under this Guaranty or any of the Underlying Instruments creating the Guaranteed Obligations and any suit or taking other action by the Lender against, and any other notice to, any party liable thereon or any property which may be security therefor.

3.

The Lender may at any time and from time to time without the consent of, or notice to, Guarantor, without incurring any responsibility to Guarantor and without impairing or releasing any of the obligations of Guarantor hereunder, upon or without any terms or conditions and in whole or in part:

(a)

renew, alter or change the interest rate, manner, time, place or terms of payment or performance of any of the Guaranteed Obligations, or any liability incurred directly or indirectly in respect thereof, whereupon the guaranty herein made shall apply to the Guaranteed Obligations as so changed, extended, renewed or altered;

(b)

sell, exchange, release, surrender, and in any manner and in any order realize upon or otherwise deal with any property at any time directly and absolutely assigned or pledged or mortgaged to secure the Guaranteed Obligations or any liabilities (including any of those hereunder) incurred directly or indirectly in respect thereof;

(c)

exercise or refrain from exercising any rights against Borrower or any other person (including Guarantor) or otherwise act or refrain from acting with regard to the Underlying Instruments, Guaranteed Obligations or this Guaranty;

(d)

settle or compromise any of the Guaranteed Obligations, any security therefor or any liability (including any of those hereunder) incurred directly or indirectly in respect thereof or hereof, and/or subordinate the payment of all or any part thereof to the payment of any liability of Borrower (whether or not then due) to creditors of Borrower other than the Lender and Guarantor;

-3-

(e)

apply any sums in whatever manner paid or realized to any liability or liabilities of Borrower to the Lender regardless of what liability or liabilities of Borrower remain unpaid;

(f)

consent to or waive any breach of or any act, omission or default under the Underlying Instruments or otherwise amend, modify or supplement any of such instruments or agreements; and/or

(g)

sell, convey or assign, whether into a securitized transaction or otherwise, all or any part of Lender's interest in this Guaranty and the Underlying Instruments.

4.

(a)

No invalidity, irregularity or unenforceability of all or any part of the Underlying Instruments, the Guaranteed Obligations or this Guaranty, or of any security therefor, shall affect, impair or constitute a defense to this Guaranty.  This Guaranty is a direct and primary obligation of Guarantor, and Guarantor's obligations hereunder are not as a surety.  This is a guaranty of payment and performance, and not merely a guaranty of collection.

(b)

Guarantor acknowledges and agrees that this Guaranty and Guarantor's obligations with respect to payments and performance under the Environmental Indemnity shall remain in full force and effect, notwithstanding the fact that the Note and payments due under the other Underlying Instruments have been paid in full.  The Guarantor’s obligations with respect to payments and performance under paragraph 9 of the Note shall remain in full force and effect until the liabilities and obligations of Borrower under paragraph 9 of the Note have been paid and performed in full.

5.

(a)

Notwithstanding any payment or payments made by Guarantor hereunder, Guarantor will not assert or exercise any right of the Lender or of such Guarantor against Borrower to recover the amount of any payment made by such Guarantor to the Lender by way of subrogation, reimbursement, contribution, indemnity or otherwise arising by contract or operation of law, and Guarantor shall not have any right of recourse to or any claim against assets or property of Borrower, whether or not the obligations of Borrower have been satisfied, all of such rights being herein expressly waived by Guarantor.  The provisions of this paragraph shall survive the termination of this Guaranty, and any satisfaction and discharge of Borrower by virtue of any payment, court order or any applicable law.

(b)

Notwithstanding the provisions of Section 5(a), Guarantor shall have and be entitled to all rights of subrogation otherwise provided by applicable law in respect of any payment Guarantor may make or be obligated to make under this Guaranty, and to assert and enforce the same, in each case on and after, but at no time prior to, the date (the "Subrogation Trigger Date") which is 91 days after the

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date on which all obligations under the Underlying Instruments shall have been paid or performed in full, if and only if the existence of Guarantor's rights under this Section 5(b) would not make Guarantor a creditor (as defined in the Bankruptcy Reform Act of 1978, an amended, 11 U.S.C. Sections 101 et seq., and the regulations adopted and promulgated pursuant thereto) of Borrower in any insolvency bankruptcy, reorganization or similar proceeding commenced on or prior to the Subrogation Trigger Date.

(c)

In the event that Guarantor shall advance or become obligated to pay any sums with respect to any obligation hereby guaranteed or in the event that for any reason whatsoever the Borrower or any subsequent owner of the collateral securing the Loan is now, or shall hereafter become, indebted to Guarantor, Guarantor agrees that the amount of such sums and of such Indebtedness together with all interest thereon, shall at all times be subordinate as to the lien, time of payment and in all other respects, to all sums, including principal, interest and other Indebtedness, at any time owing to the Lender under any of the Underlying Instruments.  Nothing herein contained is intended or shall be construed to give to Guarantor any right to participate in any way in the right, title or interest of the Lender in or to the collateral securing the Loan, notwithstanding any payments made by Guarantor under this Guaranty, all such rights of parti cipation being hereby expressly waived and released.  

6.

Guarantor agrees that to the extent that Borrower makes a payment or payments to Lender, which payment or payments or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required, for any of the foregoing reasons or for any other reasons, to be repaid or paid over to a custodian, trustee, receiver or any other party under any bankruptcy act, state or federal law, common law or equitable cause, then to the extent of such payment or repayment, the obligation or part thereof intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made.

7.

Guarantor makes the following representations and warranties which shall survive the execution and delivery of this Guaranty:

(a)

Guarantor is and, until the Indebtedness is paid in full, will continue to (i) be a duly organized and validly existing entity in good standing under the laws of the state of its formation, (ii) be duly qualified as a foreign entity in each jurisdiction in which the nature of its business makes such qualification necessary or desirable, (iii) have the requisite power and authority to carry on its business as now being conducted, (iv) have the requisite power to execute, deliver and perform its obligations under this Guaranty, and (v) comply with the provisions of all of its organizational documents, and the Legal Requirements of the state of its formation.

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(b)

The execution, delivery and performance of this Guaranty (i) are within the applicable powers of Guarantor; (ii) have been authorized by all requisite action; (iii) have received all necessary approvals and consents, corporate, governmental or otherwise; (iv) does not and will not violate, conflict with, result in a breach of or constitute (with notice or lapse of time, or both) a default under any provision of law, any order or judgment of any court or governmental authority, the articles of incorporation, by-laws, partnership, operating or trust agreement, or other governing instrument of Guarantor, or any indenture, agreement or other instrument to which Guarantor is a party or by which Guarantor or any of Guarantor's assets is or may be bound or affected; (v) does not and will not result in the creation or imposition of any lien, charge or encumbrance whatsoever upon any of Guarantor's assets; and (vi) does not and will not requir e any authorization or license from, or any filing with, any governmental authority or other body.

(c)

This Guaranty constitutes the legal, valid and binding obligations of Guarantor, enforceable against Guarantor in accordance with its terms, except as may be limited by (i) bankruptcy, insolvency, reorganization or other similar laws affecting the rights of creditors generally, and (ii) general principles of equity (regardless of whether considered in a proceeding in equity or at law).

8.

Guarantor and Borrower are separate and distinct entities with no identity of interest with respect to any Indebtedness which may become owed or any payments which may be made hereunder.  Borrower is not contractually bound to Guarantor with respect to any payments hereafter made under this Guaranty in any manner which would have the effect of imputing the liability of Guarantor hereunder to Borrower.

9.

Guarantor is related and/or affiliated with Borrower, has personal knowledge of and is familiar with Borrower's business affairs, books and records and has the ability to influence Borrower's financial decisions.  Guarantor represents that Borrower is in sound financial condition as of the date of this Guaranty.

10.

Nothing herein contained shall in any manner affect the lien or priority of the Mortgage, and upon the occurrence of an Event of a Default, the Lender may invoke any remedies it may have under the Underlying Instruments, or this Guaranty, either concurrently or successively and the exercise of any one or more of such remedies shall not be deemed an exhaustion of such remedy or remedies or a waiver of any other remedy or remedies and shall not be deemed an election of remedies.  Guarantor hereby specifically waives any defense to its performance under this Guaranty based upon an election of remedies by Lender, including but not limited to an election to foreclose by nonjudicial sale under any deed of trust or security agreement and pursue any other remedy which destroys, lessens or otherwise affects Guarantor's subrogation rights and/or its rights to reimbursement from or to proceed against Borrower or any other person, when resul ting from the judicial

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or nonjudicial foreclosure (under any deed of trust or security agreement) or the selling or otherwise disposing of or collecting or applying any property, real or personal, securing the Note, or otherwise.  The exercise by the Lender of any such remedies shall not release or discharge Guarantor from its obligations hereunder unless and until the full amount of the Indebtedness evidenced by the Note and secured as aforesaid has been fully paid and satisfied, and any such release or discharge shall be subject to the provisions of paragraph 4(b) hereof.

11.

This Guaranty shall remain in full force and effect until all obligations of the Borrower under the Underlying Instruments have been satisfied in full and are no longer subject to disgorgement under any applicable state or federal creditor rights or bankruptcy laws.  No delay on the part of the Lender in exercising any options, powers or rights, or the partial or single exercise thereof, shall constitute a waiver thereof.  No waiver of any rights hereunder, and no modification or amendment of this Guaranty, shall be deemed to be made by either party unless the same shall be in writing, duly signed on behalf of such party, and each such waiver (if any) shall apply only with respect to the specific instance involved and shall in no way impair the rights of such party or the obligations of Guarantor to the Lender in any other respect at any other time.  This Guaranty and the rights and obligations of the Lender and of Guar antor hereunder shall be governed and construed in accordance with the laws of the state of Maryland, without regard to its conflicts of law principles and this Guaranty is binding upon Guarantor, Guarantor's heirs, personal representatives and permitted successors or assigns, and shall inure to the benefit of the Lender and its successors or assigns.

12.

Guarantor acknowledges that copies of the Underlying Instruments have been made available to Guarantor and that Guarantor is familiar with their contents.  Guarantor affirmatively agrees that upon any Permitted Transfer effected in accordance with the provisions of the Underlying Instruments or any transfer by Lender of all or any portion of its interest in the Loan, it shall not be necessary for Guarantor to reaffirm its continuing obligations under this Guaranty, but Guarantor will do so upon request by Lender.

13.

GUARANTOR AND LENDER EACH KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE, TO THE EXTENT PERMITTED BY LAW, TRIAL BY JURY IN ANY ACTIONS BROUGHT BY GUARANTOR OR LENDER IN CONNECTION WITH THIS GUARANTY, ANY OF THE LOAN DOCUMENTS, THE INDEBTEDNESS SECURED HEREBY, OR ANY OTHER STATEMENTS OR ACTIONS OF LENDER.

14.

Each notice, consent, request or other communication under this Guaranty (each a "Notice") which any party hereto may desire or be required to give to the other shall be deemed to be adequate and sufficient notice if given in writing and service is made by either (i) registered or certified mail, postage prepaid, in which case such notice shall be deemed to have been received three (3) business days following deposit to U.S. mail; or

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(ii) nationally recognized overnight air courier, next day delivery, prepaid, in which case such notice shall be deemed to have been received one (1) business day following delivery to such nationally recognized overnight air courier.  All Notices shall be addressed to Guarantor at its address given on the first page hereof, or to Lender at c/o Principal Real Estate Investors, LLC, 801 Grand Avenue, Des Moines, Iowa 50392-1450, Attn: Commercial Real Estate Servicing, Loan No. 755500, or to such other place as any party may by notice in writing to the other parties designate as a place for service of notice.

15.

Each Guarantor (if more than one) whose signature appears below shall be deemed to be bound by the provisions of this Guaranty and the Guaranteed Obligations, whether each signature was affixed at the same or different times, and the term "Guarantor" as used herein shall be deemed to refer to each individually, as well as collectively, and each of the undersigned shall be jointly and severally liable for the Guaranteed Obligations hereunder, both personally and with recourse, irrespective of the recourse or non-recourse nature of the Underlying Instruments.  Guarantor agrees that if this Guaranty is placed in the hands of an attorney for enforcement, Guarantor will reimburse Lender all expenses incurred, including attorney's fees.

16.

This Guaranty may be executed in counterparts, each of which shall be deemed an original; and such counterparts when taken together shall constitute but one agreement.

17.

Capitalized terms used herein and not otherwise defined shall have the meanings given to them in the Underlying Instruments.

(Signatures on next page)

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IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be duly executed and delivered as of the date first set forth above.

GUARANTOR:

AIMCO PROPERTIES, L.P., a Delaware limited partnership

By:      AIMCO-GP, Inc., a Delaware   

            corporation, its general partner

            By: /S/Patti K. Fielding

       Name:  Patti K. Fielding

       Title:  Executive Vice President  

                              and Treasurer

EX-10

Exhibit 10.34

PROPERTY RESERVES AGREEMENT

755500

THIS PROPERTY RESERVES AGREEMENT (as the same may from time to time hereafter be modified, supplemented or amended, this "Agreement") is made as of January 19, 2007 by VMS NATIONAL PROPERTIES, an Illinois general partnership ("Borrower"), and PRINCIPAL LIFE INSURANCE COMPANY, an Iowa corporation ("Lender").

RECITALS

Lender has agreed to make a loan (the "Loan") in the original principal amount of Thirty-one Million Eight Hundred Thousand and 00/100 Dollars ($31,800,000.00) (the "Loan Amount") to Borrower as set forth in the Loan Documents, executed by and between Lender and Borrower; and

The Loan is evidenced by Borrower's Secured Promissory Note made payable and delivered to Lender (as may be modified, amended, supplemented, extended or consolidated in writing, and any note(s) issued in exchange therefor or in replacement thereof, the "Note") and further evidenced and secured by, among other things, a "Mortgage" (it being agreed that Mortgage as hereinafter used shall be construed to mean "mortgage" or "deed of trust" or "trust deed" or "deed to secure debt" as the context so requires) on certain real estate, together with all existing improvements constructed thereon, said Premises being more particularly described in said Mortgage.

NOW THEREFORE, in consideration of the making of the Loan, the mutual promises and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Lender and Borrower, intending to be legally bound, agree as follows:

1.

Property Reserves.

Borrower has agreed to deposit with Lender a letter of credit(s) (if more than one, collectively if the context so requires the "Letter of Credit") as detailed below to be held by Lender to reimburse Borrower for the costs of certain capital improvements to the Premises as described in Schedule 1 hereto and such other capital improvements to the Premises that Lender determines, in its sole discretion, provide a material benefit/improvement to the Premises upon completion thereof  (i.e. roof replacement/repair, new decks, rehabilitation of individual units)  ("Capital Improvements").  The Letter of Credit and any renewal or replacement thereof and any proceeds therefrom shall be held by Lender as additional security for the Loan and are hereafter referred to as the "Property Reserves".  The term "Escrow Release" as used herein shall refer to a disbursement of funds and/or a reduction of a Letter of Credit as applicable.

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a.

On the Closing Date, Borrower shall deliver an acceptable Letter of Credit in the amount of $340,178.00 to cover the cost of Capital Improvements.

2.

Borrower shall deliver to Lender not later than 30 days prior to the expiration date of any Letter of Credit and any renewal or replacement Letter of Credit, a renewal or replacement unconditional, irrevocable bank Letter of Credit identical in terms and amount and issued by a United States bank acceptable to Lender.  If Borrower shall fail to deliver any renewal or replacement Letter of Credit in accordance with the foregoing requirements, Lender may, in its discretion, draw upon any Letter of Credit then in its possession and hold such proceeds in accordance with the terms hereof.

Lender reserves the right to periodically review the financial condition of the issuing bank for any Letter of Credit and any renewal or replacement Letter of Credit and if Lender determines that the issuing bank no longer satisfies the criteria set forth above, Lender may require a replacement Letter of Credit in form and substance and from a United States bank acceptable to Lender.

3.

Standard Disbursement Requirements.  The following shall be defined as "Standard Disbursement Requirements":

(i)

copies of unconditional lien waivers for work completed which is the subject of the Escrow Release request;

(ii)

a title search in form and substance reasonably acceptable to Lender and if such search discloses conditions unacceptable to Lender or Lender deems it reasonably necessary, then such endorsements or other assurances reasonably satisfactory to Lender from the title insurance company insuring the continued first lien priority of the Mortgage;

(iii)

to the extent Lender deems reasonably necessary and to the extent that same are available and appropriate for the work which is the subject of the Escrow Release request, any or all of the following at Lender's discretion:  (A) all permits, bonds, licenses and approvals, whether necessary for commencement, performance, completion, occupancy, use or otherwise required by any applicable laws for the stage of work so completed; (B) a copy of the construction contract and any change orders and addenda thereto; (C) a statement from an architect, contractor or engineering consultant, in Lender's reasonable discretion, as to the extent and cost of the work so completed; and/or (D) other evidence as reasonably determined by Lender showing that Borrower has completed and performed the portion of the work which is the subject of the Escrow Release request; and

(iv)

Lender having inspected, or having expressly waived in writing such inspection, and approved the completed portion of the work which is the subject of the

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Escrow Release request.  Lender shall not require said inspection more than once per calendar year.

4.

Capital Improvements.

a.

Except as hereinafter provided and so long as no Event of Default has occurred and is continuing under the Loan Documents, Lender shall allow Escrow Release(s) in the amounts hereinafter specified in accordance with the following terms and conditions:

(i)

Escrow Release(s) shall be for an amount equal to the actual costs and expenses incurred by Borrower in completing any Capital Improvements;

(ii)

Borrower shall submit written Escrow Release requests to Lender for Capital Improvements no more than once per calendar month and each such request shall be for an aggregate amount of not less than $25,000 (excluding the final disbursement); and

(iii)

Escrow Release(s) shall be conditioned upon Borrower furnishing to Lender with its written request, at Lender's discretion, the Standard Disbursement Requirements.

5.

Interest on Property Reserves.  Provided no Event of Default has occurred under any of the Loan Documents, Lender agrees to credit Borrower with interest earnings on the cash portion of the Property Reserves, (excluding however any cash proceeds resulting from Lender having drawn on any Letter of Credit or any renewal or replacement thereof); provided, however, that interest shall cease to be credited on any portion of the Property Reserves at such time as they have been disbursed to Borrower or otherwise applied in any manner provided in this Agreement or in the other Loan Documents.  Interest shall be credited on the average balance of the cash portion of the Property Reserves for the preceding calendar month or any portion of such preceding calendar month on or before the tenth (10^th) day of each calendar month at a rate equal to the thirty-day average of the daily 30-day Dealer Commercial Paper Rate as p ublished in the Wall Street Journal or similar financial publication, less 200 basis points.  Interest shall be disbursed to Borrower at such time and in the same manner as provided for disbursement of Property Reserves.

6.

Administration/Inspection Fee.  Lender shall be entitled to charge Borrower a reasonable processing fee for administering and reviewing an Escrow Release, not to exceed $500.00.  Lender shall also be entitled to charge Borrower reasonable processing fees both for reviewing any renewal or replacement Letter of Credit which Borrower is required to provide as well as for drawing upon any Letter of Credit held pursuant to the terms hereof (the processing fee for reviewing any renewal or replacement Letter of Credit shall not exceed $250.00).  Borrower shall be responsible for payment of all costs, fees and charges in connection with any

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reduction, renewal or replacement of the Letter of Credit which are assessed by the issuing bank.  Additionally, Lender shall be entitled to charge Borrower for any reasonable costs incurred by Lender in inspecting the Premises, not to exceed $750.00.

7.

Security Agreement.  This Agreement and the escrow of the Property Reserves under the terms hereof are intended to create a prior perfected security interest in the Property Reserves.  As more fully described in the Loan Documents, Borrower has assigned, conveyed, pledged and transferred to Lender and granted to Lender a first and continuing lien on and security interest in and to, among other things, all of Borrower's right, title and interest in and to the Property Reserves, which secure the full and punctual payment and performance of all of the Indebtedness.  Nothing contained herein shall cause Lender to be deemed a trustee of any Letter of Credit, any renewal thereof or any proceeds therefrom.  The Property Reserves shall not constitute any deposit or account of the Borrower or monies to which the Borrower is entitled upon demand, or upon the mere passage of time.  Lender shall not be required to s egregate the Property Reserves or hold them in any separate account for the benefit of the Borrower.  Upon the payment in full of all sums due to Lender under the Loan Documents, Lender shall promptly deliver the then existing Property Reserves to Borrower.

8.

Event of Default.  Upon the occurrence of an Event of Default under any of the Loan Documents, Lender may, with respect to the Property Reserves, or any portion thereof, exercise all enforcement rights and remedies granted to Lender under the Loan Documents and in addition to all other rights and remedies granted to Lender under the Loan Documents, Lender may, at its option, use such funds partially or in full (including any portion or all of the proceeds resulting from drawing on any Letter of Credit), in such order and preference as Lender may determine, to (1) cure or partially cure any Event of Default; (2) complete the work which is the subject of this Agreement; (3) pay any interest accrued under the terms of the Note; (4) pay any other Indebtedness; (5) pay the Make Whole Premium, if any, due and payable; (6) prepay the principal amount of the Loan or any part thereof; or (7) hold such funds in a non-interest bearing account as additional security for the Loan.  In the event the Property Reserves or any portion thereof are applied to prepay the principal amount of the Loan or any part thereof, Borrower waives any right to prepay the principal amount in whole or in part without premium, and agrees to pay, as liquidated damages and not as a penalty, a Make Whole Premium on any principal amount prepaid.  Notwithstanding anything contained herein to the contrary, nothing shall be construed to (a) make Lender responsible for performing or completing the work which is the subject of this Agreement, (b) require Lender to expend sums to complete the work which is the subject of this Agreement which are in excess of such amounts then allocated by Lender for such items, or (c) obligate Lender to demand from Borrower additional sums to complete the work which is the subject of this Agreement.

9.

Cost Overruns.  In the event that the costs and expenses incurred by Borrower in completing any work which is the subject of this Agreement exceed the respective amounts allocated by Lender for such items of expense, Borrower shall be responsible for the payment (from sources other than the Property Reserves) of such excess costs and expenses.

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10.

Notices.  All notices required to be sent hereunder shall be deemed to be an adequate and sufficient notice if given in accordance with the notice provisions of the Mortgage.

11.

Governing Law.  This Agreement shall be governed, construed, and enforced in accordance with the laws of the state in which the Premises is located, without regard to its conflicts of law principles.

12.

Headings.  The headings used herein are for convenience only and are not to be used in interpreting this Agreement.  Capitalized terms used herein and not otherwise defined shall have those meanings given to them in the Loan Documents.  Notwithstanding anything herein to the contrary, the terms and provisions of this Agreement as to Escrow Release(s) shall control over any provisions in the other Loan Documents to the contrary.

13.

Amendments.  This Agreement, and any provisions hereof, may not be modified, amended, waived, extended, changed, discharged or terminated orally or by any act or failure to act on the part of Borrower or Lender, but only by an agreement in writing signed by the parties hereto.

14.

Counterparts.  This Agreement may be executed in counterparts, each of which shall be deemed an original; and such counterparts when taken together shall constitute but one agreement.

15.

Inapplicable Provisions.  If any term, covenant or condition of this Agreement is held to be invalid, illegal or unenforceable in any respect, this Agreement shall be construed without such provision.

16.

Successors and Assigns.  This Agreement and all the provisions hereof shall inure to the benefit of the heirs, successors and assigns of Lender and shall bind the heirs, representatives, and permitted successors and assigns of Borrower.

(Signatures on next page)

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IN WITNESS WHEREOF, Borrower and Lender have hereunto caused this Agreement to be executed the date first above written.

LENDER:

PRINCIPAL LIFE INSURANCE COMPANY, an Iowa corporation

By:

PRINCIPAL REAL ESTATE INVESTORS, LLC, a Delaware limited liability company, its authorized signatory

By

__________________________

Name:

Title:

By

__________________________

Name:

Title:

(Signatures continued on following page)

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BORROWER:

VMS NATIONAL PROPERTIES, an Illinois general partnership

By:

VMS NATIONAL RESIDENTIAL PORTFOLIO I, an Illinois limited partnership

By:

MAERIL, INC., a Delaware  

                        corporation, its general partner

       By: /s/Patti K. Fielding

       Name:  Patti K. Fielding

                Title:  Executive Vice President  

                           and Treasurer

By:

VMS NATIONAL RESIDENTIAL PORTFOLIO II, an Illinois limited partnership

By:

MAERIL, INC., a Delaware  

                        corporation, its general partner

       By: /s/Patti K. Fielding

       Name:  Patti K. Fielding

                Title:  Executive Vice President  

                           and Treasurer

EX-10

EXHIBIT 10.35

SECURED PROMISSORY NOTE

755498

$29,000,000.00

January 19, 2007

1.

FOR VALUE RECEIVED, VMS NATIONAL PROPERTIES, an Illinois general partnership, as "Borrower" ("Borrower"), hereby promises to pay to the order of PRINCIPAL LIFE INSURANCE COMPANY, an Iowa corporation (as "Lender"), the principal sum of Twenty-nine Million and 00/100 Dollars ($29,000,000.00) or so much thereof as shall from time to time have been advanced, together with interest on the unpaid balance of said sum from January 19, 2007 (the "Closing Date"), at the rate of six and sixteen one-hundredths percent (6.16%) per annum.  

A payment of interest from the Closing Date to and including January 31, 2007 shall be paid on the Closing Date calculated by multiplying the actual number of days elapsed in the period for which interest is being calculated by a daily rate based on the foregoing annual interest rate and a 360-day year.  Thereafter, interest shall be computed on the unpaid balance on the basis of a 360-day year composed of twelve 30-day months.  Beginning on March 1, 2007, interest shall be due and payable in installments of One Hundred Forty-eight Thousand Eight Hundred Sixty-six and 66/100 Dollars ($148,866.66), with an installment in a like amount due and payable on the same day of each month thereafter, and except as otherwise provided in this Note, all remaining principal and interest to the date of payment and other indebtedness shall be due and payable on February 1, 2010 ("Call Date").  Lender shal l have the right to declare this Note and the Other Note (as defined below) to be due and payable in full on the Call Date or to adjust the per annum interest rate on the Rate Adjustment Date to an interest rate established by Lender ("Adjusted Interest Rate") as herein provided (and apply an amortization schedule, if any, as herein provided).  In the event Lender elects to declare this Note and the Other Note to be due and payable, this Note and the Other Note shall become due and payable, in full, without a Make Whole Premium on the Call Date.  In the event Lender elects to adjust the interest rate, then on February 1, 2010 ("Rate Adjustment Date") the per annum interest rate shall be adjusted to the Adjusted Interest Rate and commencing on March 1, 2010, monthly installments of principal (if applicable) and interest shall be due and payable on the same day of each month thereafter, except that all remaining principal and interest to the date of payment shall be due and payable on February 1, 2012 or such earlier date resulting from acceleration of the Indebtedness by Lender ("Maturity Date").  Each installment shall be credited first upon interest then accrued and the remainder upon principal.  All principal and interest shall be paid in lawful money of the United States of America, by wire transfer of immediately available funds to Lender.  Any other monthly deposits or payments Borrower is required to make to Lender under the terms of the Loan Documents shall be made by the same payment method and on the same date as the installments of principal and interest due under this Note.

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The term the "Other Note" as used herein shall mean that certain secured promissory note of even date herewith in the original principal amount of $20,000,000.00 given by Borrower to Lender, as may be modified, amended, supplemented, extended or consolidated in writing and any note(s) issued in exchange therefor or replacement thereof.  Any default by Borrower under the Other Note shall constitute a default under this Note.  Borrower is justly indebted to Lender for the aggregate principal sum of $49,000,000.00 (the "Loan Amount") as evidenced by this Note and the Other Note.

Lender shall notify Borrower in writing ("Lender's Election Notice") on or before November 1, 2009 of Lender's election to adjust the interest rate or of Lender's intention to declare this Note and the Other Note to be due and payable in full.  In the event Lender elects to adjust the interest rate, Lender's Election Notice will contain (i) the number of basis points ("Spread") and the United States Treasury Issue (which shall be the two (2) year United States Treasury Issue) that Lender anticipates it will use to establish the Adjusted Interest Rate and (ii) the amortization schedule Lender has elected to apply, if any.  The Spread shall be determined by Lender in its sole discretion based on Lender's evaluation of:  (i) the then current financial performance and projected risk of the Premises, which shall encompass various factors, including but not limited to contract debt servic e coverage, loan-to-value ratio, economic debt service coverage, occupancy, frequency of tenant rollover, financial strength and stability of tenants; (ii) the then current financial status of Borrower, which shall include but not be limited to creditworthiness, financial strength, percentage of liabilities to liquid assets, and annual net income; and (iii) the remaining term and current outstanding balance of the Note.  

At any time and from time to time before the Adjusted Interest Rate is established, provided at least seven (7) days have elapsed since the previous Lender's Election Notice, Lender may establish a new Spread which Lender anticipates it will use to establish the Adjusted Interest Rate and notify Borrower of the same.  The Adjusted Interest Rate and amortization schedule, if any, must be established by mutual written agreement of Lender and Borrower by December 1, 2009 (the "Rate Set Deadline").  The Adjusted Interest Rate may only be established by mutual written agreement of Lender and Borrower and simultaneous payment by Borrower of Seventeen Thousand Seven Hundred and 00/100 Dollars ($17,700.00) ("Rate Adjustment Fee").  Notwithstanding anything contained herein to the contrary, in the event:  (i) Lender notifies Borrower of its intention to declare this Note to be due and p ayable in full, (ii) Lender and Borrower are unable for any reason to mutually agree in writing on the Adjusted Interest Rate by the Rate Set Deadline; or (iii) Borrower fails to pay the Rate Adjustment Fee to Lender when due, this Note and the Other Note shall become due and payable in full, on the Call Date, without a Make Whole Premium, and all principal, interest accrued or to accrue to the date of prepayment at the rate in effect at the time of the initial Lender's Election Notice, and all other Indebtedness shall become immediately due and payable in full.  Notwithstanding any other provision herein, Lender shall not be obligated to adjust the interest rate if any default exists under this Note, the Other Note or the Loan Documents.

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In the event Borrower accepts the Adjusted Interest Rate, then notwithstanding anything herein or in any of the Loan Documents to the contrary, Borrower shall have no right to prepay the Loan at par during the Open Period and any prepayment will be subject to a Make Whole Premium for the period ending on the Maturity Date calculated at the Adjusted Interest Rate.

In the event Borrower accepts the Adjusted Interest Rate, Borrower is required to provide Lender the following:

(i)

a new ALTA standard loan title policy for the Loan or an endorsement updating said title policy in the full amount of the in form and by an issuer satisfactory to Lender at the time of the rate adjustment unless (x) the outstanding balance of the Loan at the time of the Call Date is equal to or less than $20,000,000.00, (y) no liens or encumbrances exist against the Premises except as previously approved by Lender in the Deed of Trust, and (z) no mortgages or deeds of trust exist against the Premises except for the Mortgage.  Borrower further agrees that the policy shall insure Lender's Deed of Trust, at the Adjusted Interest Rate to be a first and prior lien subject only to those exceptions which were previously approved by Lender and provide coverage against mechanic's liens;

(ii)

an amendment to the Note in form and substance satisfactory to Lender executed by Borrower evidencing the Adjusted Interest Rate and a representation that the Premises is free and clear of any liens, privileges, mortgages or encumbrances except as expressly permitted in the Deed of Trust;

(iii)

a usury opinion or endorsement to the title policy acceptable to Lender if Lender reasonably believes that the Adjusted Interest Rate is or may be usurious; and

(iv)

a title search acceptable to Lender and reimbursement for Lender's costs incurred in obtaining the same.

2.

No privilege is reserved by Borrower to prepay any principal of this Note prior to the Maturity Date, except on or after hereof, privilege is reserved after giving thirty (30) days prior written notice to Lender and the lender under the Other Note, to prepay in full, but not in part, all principal and interest to the date of payment, along with all sums, amounts, advances or charges due under any instrument or agreement by which they are secured, upon the payment of a "Make Whole Premium" if required by the schedule below, provided that Borrower simultaneously exercises its right to prepay the Other Note as provided for therein.  The Make Whole Premium shall be based on the following schedule:

(i)

if prepayment occurs prior to March 1, 2008 or after February 1, 2010 and prior to March 1, 2011, the Make Whole Premium shall be one-half percent (.50%) of the principal amount to be prepaid;

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(ii)

provided no Event of Default exists, during the period beginning on or after March 1, 2008 to and including February 1, 2010 or on or after March 1, 2011 to and including February 1, 2012 (each collectively the "Open Period") no Make Whole Premium shall be payable.

3.

Borrower agrees that if Lender accelerates the whole or any part of the principal sum evidenced hereby after the occurrence of an Event of Default but prior to the Open Period, Borrower waives any right to prepay said principal sum in whole or in part without premium and agrees to pay, as yield maintenance protection and not as a penalty, the Make Whole Premium.  

In the event any proceeds from a casualty or Taking of the Premises are applied to reduce the principal balance hereof, such reduction shall be made without a Make Whole Premium, provided no Event of Default then exists under the Loan Documents.

Borrower by adding its initials to the end of this paragraph, (A) expressly waives any rights it may have under California Civil Code Section 2954.10 to prepay this Note, in whole or in part, without penalty, upon acceleration of the Indebtedness and (B) acknowledges and agrees that Borrower has no right of prepayment of this Note, except as provided above; and that, if the maturity of this Note is accelerated by Lender, Borrower specifically agrees to pay as a prepayment premium, the applicable sum specified herein as the Make Whole Premium, specifically including but not limited to the case where the holder of this Note has accelerated the maturity of this note due to Borrower's default of any provision contained in 2(f) of the Deed of Trust.  By initialing this provision, Borrower hereby declares that Lender's agreement to make the Loan evidenced by this Note for the interest rate and for the term set forth in this Note con stitutes adequate consideration, given individual weight by Borrower, for this waiver and agreement.

Initials: ________________    ________________

4.

If any payment of principal, interest, or other Indebtedness is not made when due, damages will be incurred by Lender, including additional expense in handling overdue payments, the amount of which is difficult and impractical to ascertain.  Borrower therefor agrees to pay, upon demand, the sum of four cents ($.04) for each one dollar ($1.00) of each said payment which becomes overdue ("Late Charge") as a reasonable estimate of the amount of said damages, subject, however, to the limitations contained in paragraph 6 hereof.

Notwithstanding anything hereinabove to the contrary, the Late Charge assessed on any amount due on the Maturity Date or the Call Date (if Lender declares this Note and the Other Note due and payable as described hereinabove) but not then paid, whether or not by acceleration, shall not be four cents for each one dollar as described above, but shall instead be a sum equal to the interest which would have accrued on the principal balance then outstanding from the date the payment was due to the end of the month in which the Maturity Date or Call Date (if applicable) occurs.  Such Late Charge shall be in addition to interest otherwise accruing under this Note.

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5.

If any Event of Default has occurred and is continuing under the Loan Documents, the entire principal balance of the Loan, interest then accrued, and Make Whole Premium, and all other Indebtedness whether or not otherwise then due, shall at the option of Lender, become immediately due and payable without demand or notice, and whether or not Lender has exercised said option, interest shall accrue on the entire principal balance, interest then accrued, Make Whole Premium and any other Indebtedness then due, at a rate equal to the Default Rate until fully paid.

6.

Notwithstanding anything herein or in any of the other Loan Documents to the contrary, no provision contained herein or therein which purports to obligate Borrower to pay any amount of interest or any fees, costs or expenses which are in excess of the maximum permitted by applicable law, shall be effective to the extent it calls for the payment of any interest or other amount in excess of such maximum.  All agreements between Borrower and Lender, whether now existing or hereafter arising and whether written or oral, are hereby limited so that in no contingency, whether by reason of demand for payment or acceleration of the maturity hereof or otherwise, shall the interest contracted for, charged or received by Lender exceed the maximum amount permissible under applicable law.  If, from any circumstance whatsoever, interest would otherwise be payable to Lender in excess of the maximum lawful amount, the interest payable to Lend er shall be reduced to the maximum amount permitted under applicable law; and if from any circumstance Lender shall ever receive anything of value deemed interest by applicable law in excess of the maximum lawful amount, an amount equal to any excessive interest shall, at the option of Lender, be refunded to Borrower or be applied to the reduction of the principal hereof, without a Make Whole Premium and not to the payment of interest or, if such excessive interest exceeds the unpaid balance of principal hereof such excess shall be refunded to Borrower.  This paragraph shall control all agreements between Borrower and Lender.

7.

Borrower and any endorsers or guarantors waive presentment, protest and demand, notice of protest, demand and dishonor and nonpayment, and agree the Maturity Date of this Note or any installment may be extended without affecting any liability hereunder, and further promise to pay all reasonable costs and expenses, including but not limited to, reasonable attorney's fees incurred by Lender in connection with any default or in any proceeding to interpret and/or enforce any provision of the Loan Documents.  No release of Borrower from liability hereunder shall release any other maker, endorser or guarantor hereof.

8.

This Note is secured by the Loan Documents creating among other things legal and valid encumbrances on and an assignment of all of Borrower's interest in any Leases of the Premises located in the county of San Mateo, State of California.  Capitalized terms used herein and not otherwise defined shall have those meanings given to them in the Loan Documents.  In no event shall such documents be construed inconsistently with the terms of this Note, and in the event of any discrepancy between any such documents and this Note, the terms hereof shall govern.  The proceeds of this Note are to be used for business, commercial, investment or other similar purposes, and no portion thereof will be used for any personal, family or household use.  This

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Note shall be governed by and construed in accordance with the laws of the State where the Premises is located, without regard to its conflict of law principles.

9.

Notwithstanding any provision to the contrary in this Note or the Loan Documents and except as otherwise provided for below, the liability of Borrower under the Loan Documents shall be limited to the interest of Borrower in the Premises and the Rents.  In the event of foreclosure of the liens evidenced by the Loan Documents, no judgment for any deficiency upon the Indebtedness evidenced by the Loan Documents shall be sought or obtained by Lender against Borrower.  Nothing herein shall in any manner limit or impair (i) the lien or enforcement of the Loan Documents pursuant to the terms thereof or (ii) the obligations of any indemnitor or guarantor, if any.

Notwithstanding any provision hereinabove to the contrary, Borrower shall be personally liable to Lender for:

(a)

any loss or damage to Lender arising from (i) the sale or forfeiture of the Premises resulting from Borrower's failure to pay any of the taxes, assessments or charges specified in the Loan Documents or (ii) Borrower's failure to insure the Premises in compliance with the provisions of the Loan Documents;

(b)

any event or circumstance for which Borrower indemnifies Lender under the Environmental Indemnity;

(c)

nonpayment of taxes, assessments, insurance premiums and utilities for the Premises and any penalty or late charge associated with nonpayment thereof prior to the Sale (as defined below) of the Premises;

(d)

any loss or damage to the Premises as a result of waste, gross negligence or willful misconduct by Borrower;  

(e)

intentionally deleted;

Borrower's personal liability for items specified in (c) and (d) above shall be limited to the amount of rents, issues, proceeds and profits from the Premises ("Rents and Profits") received by Borrower for the twenty-four (24) months preceding an Event of Default and thereafter; but less any such Rents and Profits applied to (A) payment of principal, interest and other charges when due under the Loan Documents, or (B) payment of expenses for the operation, maintenance, taxes, assessments, utility charges and insurance of the Premises including sufficient reserves for the same or replacements or renewals thereof ("Operation Expense(s)") provided that (x) Borrower has furnished Lender with evidence reasonably satisfactory to Lender of the Operation Expenses and payment thereof, and (y) any payments to parties related to Borrower shall be considered an

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Operation Expense only to the extent that the amount expended for the Operation Expense does not exceed the then current market rate for such Operation Expense.

(f)

misapplication or misappropriation of rents in violation of the Loan Documents;  

(g)

any security deposits of tenants not otherwise applied in accordance with the terms of the Lease(s), together with any interest on such security deposits required by law or the leases, not turned over to Lender upon conveyance of the Premises to Lender pursuant to foreclosure or power of sale or by a deed acceptable to Lender in form and content;

(h)

any loss or damage to Lender arising from the misapplication or misappropriation of tax reserve accounts, tenant improvement reserve accounts, security deposits, prepaid rents or other similar sums paid to or held by Borrower or any other entity or person in connection with the operation of the Premises;

(i)

any insurance or condemnation proceeds or other similar funds or payments applied by Borrower in a manner other than as expressly provided in the Loan Documents;

(j)

any loss or damage to Lender arising from any fraud or willful misrepresentation by or on behalf of Borrower, Interest Owner or any guarantor regarding the Premises, the making or delivery of any of the Loan Documents or in any materials or information provided by or on behalf of Borrower, Interest Owner or guarantor, if any, in connection with the Loan; and

(k)

any loss or damage to Lender arising from the loss of Lender’s perfection or priority of its security interest in personal property or fixtures covered under any UCC financing statement due to Borrower’s failure to notify Lender as provided for in paragraph 1(h) of the Mortgage.

Notwithstanding anything contained in paragraphs 9(a)(i) and 9(c) hereinabove as it relates solely to taxes, assessments and insurance premiums, to the extent Lender is impounding for taxes, assessments and insurance premiums in accordance with the Loan Documents and Borrower has fully complied with all terms and conditions of the Loan Documents relating to impounding for the same, then Borrower shall not be personally liable for Lender's failure to apply any of said impound amounts held by Lender in accordance with the Loan Documents.

Notwithstanding anything to the contrary in the Loan Documents, the limitation on liability contained in the first paragraph of this paragraph 9 SHALL BECOME NULL AND VOID and shall be of no further force and effect in the event:

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(y)

of any breach or violation of paragraph 2(f) (due on sale or encumbrance) of the Mortgage, other than (i) the filing of a nonmaterial mechanic's lien affecting the Premises or a mechanic's lien affecting the Premises for which Borrower has complied with the provisions of paragraph 1(e) of the Mortgage, or (ii) the granting of any utility or other nonmaterial easement or servitude burdening the Premises, or (iii) any transfer or encumbrance of a nonmaterial economic interest in the Premises not otherwise set forth in (i) or (ii), or (iv) an immaterial breach or violation of the Property Transfer Requirements, Ownership Transfer Requirements, Specific Transfer Requirements I-V or the Mezzanine Financing Requirements; or

(z)

of any filing by Borrower of a petition in bankruptcy or insolvency or a petition or answer seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under the Bankruptcy laws of the United States or under any other applicable federal, state or other statute or law.

10.

If more than one, all obligations and agreements of Borrower are joint and several.

11.

This Note may not be changed or terminated orally, but only by an agreement in writing and signed by the party against whom enforcement of any waiver, change, modification or discharge is sought.  All of the rights, privileges and obligations hereunder shall inure to the benefit of the heirs, successors and assigns of Lender and shall bind the heirs and permitted successors and assigns of Borrower.  

12.

If any provision of this Note shall, for any reason, be held to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision hereof, but this Note shall be construed as if such invalid or unenforceable provision had never been contained herein.

13.

This Note may be executed in counterparts, each of which shall be deemed an original; and such counterparts when taken together shall constitute but one agreement.

14.

This provision does not represent a commitment by Lender to lend additional dollars (the "Additional Advance") to Borrower, as Lender is under no obligation to make an Additional Advance. Borrower may request Lender to fund to Borrower an additional advance of principal ("Request for Advance"), provided the requested Additional Advance, in combination with the original Loan, meet certain "Minimum Economic Criteria" (set forth below).    

If Lender does choose to make an Additional Advance, the following conditions precedent must be satisfied:

The "Minimum Economic Criteria" are:

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(a)

The combined outstanding Indebtedness on the original Loan and the Additional Advance does not exceed Seventy-seven percent (77%) of the appraised value of the Premises as established by an appraisal of the Premises prepared by an MAI appraiser approved by Lender and in form and substance acceptable to Lender, said appraisal at Borrower's cost;

(b)

Debt service of coverage of 1.20 times the annual debt service on the combined outstanding Indebtedness on the original Loan and the Additional Advance, as determined by Lender.  The debt service coverage shall be the annual net operating income divided by the total annual installment payments due under the combined outstanding Indebtedness on the original Loan and the Additional Advance, including accrued or capitalized interest.  Only net operating income from approved executed Leases in effect on the Premises with no uncured defaults shall be used in Lender's determination of the foregoing.  Borrower shall provide a certified rent roll with its Request for Advance; and

(c)

At the time of the Request for Advance, at least twelve (12) months must remain in the Loan term.

Provided no Event of Default exists under the Loan Documents, if Lender determines that the Minimum Economic Criteria are satisfied, Lender may notify Borrower in writing ("Lender's Notice") of the number of basis points ("Spread") and the United States Treasury Issue ("Treasury Issue") that Lender will use to establish the interest rate applicable to the Additional Advance ("AA Interest Rate").  The Spread shall be determined by the Lender, in its sole discretion.

At any time and from time to time before the date that the AA Interest Rate is agreed to, provided at least seven (7) days have elapsed since the previous Lender's Notice, Lender may establish a new Spread which Lender anticipates it will use to establish the AA Interest Rate and notify Borrower of the same.  The AA Interest Rate must be established by the date which is 30 days following the date of the initial Lender's Notice (the "AA Rate Set Deadline").  The AA Interest Rate may only be established on a date mutually agreed to by Lender and Borrower. If Borrower fails to respond to the most current Lender's Notice in writing by the AA Rate Set Deadline, all of the Lender's Notices shall be deemed rejected.  If Borrower rejects the terms set forth in the Lender's Notice, Borrower shall then have the right to obtain Mezzanine Financing on the terms set forth in the Mortgage.  If Borrower accepts the terms set forth in Lender's Notice, Lender shall agree to fund the Additional Advance, provided the following closing conditions ("Closing Conditions") are met:

(a)

Borrower's execution, delivery, acknowledgement and recordation, as applicable, of acceptable documentation evidencing and securing the Additional Advance including, but not limited to, additional note(s), revised and/or replacement loan modification agreements, indemnification agreements, escrow security or property reserve agreements, security instruments, financing statements, UCCs, new or revised letters of credit and/or

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guarantees in form and substance satisfactory to Lender;

(b)

Receipt of either (at Lender's discretion) a new ALTA standard loan policy or an endorsement updating the Lender's existing loan policy in the full amount of the Loan (as increased by the Additional Advance), in form and by an issuer satisfactory to Lender, and which insures the Mortgage to be a first and prior lien subject only to those exceptions which were previously approved by Lender and provides coverage against usury and mechanic's liens (an acceptable usury opinion can be substituted for the usury coverage);

(c)

Compliance with Lender's then current underwriting and closing due diligence requirements.

(d)

Receipt of acceptable third party reports addressing property physical and environmental condition, upon request of Lender, prepared by consultants acceptable to Lender;

(e)

Payment by Borrower of all third party expenses incurred, including but not limited to outside counsel fees and costs;

(f)

Payment of Borrower of an "Additional Advance Fee" equal to .5% of the amount of the Additional Advance.  The Additional Advance Fee is non-refundable and is due upon Borrower's acceptance of the terms set forth in the Lender's Notice.

In the event (i) Lender does not choose to make the Additional Advance; (ii) Borrower rejects the terms set forth in the Lender's Notice, or (iii) Borrower is unable to satisfy the Closing Conditions, Borrower shall have the ability to obtain Mezzanine Financing as more particularly described in paragraph 2(f) of the Mortgage.

(Signatures on next page)

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IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed and delivered as of the date first set forth above.

VMS NATIONAL PROPERTIES, an Illinois general partnership

By:

VMS NATIONAL RESIDENTIAL PORTFOLIO I, an Illinois limited partnership

By:

MAERIL, INC., a Delaware

                        corporation, its general partner

       By: /s/Patti K. Fielding

       Name:  Patti K. Fielding

                Title:  Executive Vice President  

                           and Treasurer

By:

VMS NATIONAL RESIDENTIAL PORTFOLIO II, an Illinois limited partnership

By:

MAERIL, INC., a Delaware

                        corporation, its general partner

       By: /s/Patti K. Fielding

       Name:  Patti K. Fielding

                Title:  Executive Vice President  

                           and Treasurer

EX-10

EXHIBIT 10.36

SECURED PROMISSORY NOTE

755498

$20,000,000.00

January 19, 2007

1.

FOR VALUE RECEIVED, VMS NATIONAL PROPERTIES, an Illinois general partnership, as "Borrower" ("Borrower"), hereby promises to pay to the order of PRINCIPAL LIFE INSURANCE COMPANY, an Iowa corporation (as "Lender"), the principal sum of Twenty Million and 00/100 Dollars ($20,000,000.00) or so much thereof as shall from time to time have been advanced, together with interest on the unpaid balance of said sum from January 19, 2007 (the "Closing Date"), at the rate of six and sixteen one-hundredths percent (6.16%) per annum.  

A payment of interest from the Closing Date to and including January 31, 2007 shall be paid on the Closing Date calculated by multiplying the actual number of days elapsed in the period for which interest is being calculated by a daily rate based on the foregoing annual interest rate and a 360-day year.  Thereafter, interest shall be computed on the unpaid balance on the basis of a 360-day year composed of twelve 30-day months.  Beginning on March 1, 2007, interest shall be due and payable in installments of One Hundred Two Thousand Six Hundred Sixty-six and 67/100 Dollars ($102,666.67), with an installment in a like amount due and payable on the same day of each month thereafter, and except as otherwise provided in this Note, all remaining principal and interest to the date of payment and other indebtedness shall be due and payable on February 1, 2010 ("Call Date").  Lender shall have the right to declare this Note and the Other Note (as defined below) to be due and payable in full on the Call Date or to adjust the per annum interest rate on the Rate Adjustment Date to an interest rate established by Lender ("Adjusted Interest Rate") as herein provided (and apply an amortization schedule, if any, as herein provided).  In the event Lender elects to declare this Note and the Other Note to be due and payable, this Note and the Other Note shall become due and payable, in full, without a Make Whole Premium on the Call Date.  In the event Lender elects to adjust the interest rate, then on February 1, 2010 ("Rate Adjustment Date") the per annum interest rate shall be adjusted to the Adjusted Interest Rate and commencing on March 1, 2010, monthly installments of principal (if applicable) and interest shall be due and payable on the same day of each month thereafter, except that all remaining principal and interest to the date of payment shall be due and payable on February 1, 2012 or such earlier date resulting from acceleration of the Indebtedness by Lender ("Maturity Date").  Each installment shall be credited first upon interest then accrued and the remainder upon principal.  All principal and interest shall be paid in lawful money of the United States of America, by wire transfer of immediately available funds to Lender.  Any other monthly deposits or payments Borrower is required to make to Lender under the terms of the Loan Documents shall be made by the same payment method and on the same date as the installments of principal and interest due under this Note.

The term the "Other Note" as used herein shall mean that certain secured promissory note of even date herewith in the original principal amount of $29,000,000.00 given by Borrower to

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Lender, as may be modified, amended, supplemented, extended or consolidated in writing and any note(s) issued in exchange therefor or replacement thereof.  Any default by Borrower under the Other Note shall constitute a default under this Note.  Borrower is justly indebted to Lender for the aggregate principal sum of $49,000,000.00 (the "Loan Amount") as evidenced by this Note and the Other Note.

Lender shall notify Borrower in writing ("Lender's Election Notice") on or before November 1, 2009 of Lender's election to adjust the interest rate or of Lender's intention to declare this Note and the Other Note to be due and payable in full.  In the event Lender elects to adjust the interest rate, Lender's Election Notice will contain (i) the number of basis points ("Spread") and the United States Treasury Issue (which shall be the two (2) year United States Treasury Issue) that Lender anticipates it will use to establish the Adjusted Interest Rate and (ii) the amortization schedule Lender has elected to apply, if any.  The Spread shall be determined by Lender in its sole discretion based on Lender's evaluation of:  (i) the then current financial performance and projected risk of the Premises, which shall encompass various factors, including but not limited to contract debt servic e coverage, loan-to-value ratio, economic debt service coverage, occupancy, frequency of tenant rollover, financial strength and stability of tenants; (ii) the then current financial status of Borrower, which shall include but not be limited to creditworthiness, financial strength, percentage of liabilities to liquid assets, and annual net income; and (iii) the remaining term and current outstanding balance of the Note.  

At any time and from time to time before the Adjusted Interest Rate is established, provided at least seven (7) days have elapsed since the previous Lender's Election Notice, Lender may establish a new Spread which Lender anticipates it will use to establish the Adjusted Interest Rate and notify Borrower of the same.  The Adjusted Interest Rate and amortization schedule, if any, must be established by mutual written agreement of Lender and Borrower by December 1, 2009 (the "Rate Set Deadline").  The Adjusted Interest Rate may only be established by mutual written agreement of Lender and Borrower and simultaneous payment by Borrower of Twelve Thousand Three Hundred and 00/100 Dollars ($12,300.00) ("Rate Adjustment Fee").  Notwithstanding anything contained herein to the contray, in the event:  (i) Lender notifies Borrower of its intention to declare this Note and the Other Note to be due and payable in full, (ii) Lender and Borrower are unable for any reason to mutually agree in writing on the Adjusted Interest Rate by the Rate Set Deadline; or (iii) Borrower fails to pay the Rate Adjustment Fee to Lender when due, this Note and the Other Note shall become due and payable in full, on the Call Date, without a Make Whole Premium, and all principal, interest accrued or to accrue to the date of prepayment at the rate in effect at the time of the initial Lender's Election Notice, and all other Indebtedness shall become immediately due and payable in full.  Notwithstanding any other provision herein, Lender shall not be obligated to adjust the interest rate if any default exists under this Note, the Other Note or the Loan Documents.

In the event Borrower accepts the Adjusted Interest Rate, then notwithstanding anything herein or in any of the Loan Documents to the contrary, Borrower shall have no right to prepay

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the Loan at par during the Open Period and any prepayment will be subject to a Make Whole Premium for the period ending on the Maturity Date calculated at the Adjusted Interest Rate.

In the event Borrower accepts the Adjusted Interest Rate, Borrower is required to provide Lender the following:

(i)

a new ALTA standard loan title policy for the Loan or an endorsement updating said title policy in the full amount of the in form and by an issuer satisfactory to Lender at the time of the rate adjustment unless (x) the outstanding balance of the Loan at the time of the Call Date is equal to or less than $20,000,000.00, (y) no liens or encumbrances exist against the Premises except as previously approved by Lender in the Deed of Trust, and (z) no mortgages or deeds of trust exist against the Premises except for the Mortgage.  Borrower further agrees that the policy shall insure Lender's Deed of Trust, at the Adjusted Interest Rate to be a first and prior lien subject only to those exceptions which were previously approved by Lender and provide coverage against mechanic's liens;

(ii)

an amendment to the Note in form and substance satisfactory to Lender executed by Borrower evidencing the Adjusted Interest Rate and a representation that the Premises is free and clear of any liens, privileges, mortgages or encumbrances except as expressly permitted in the Deed of Trust;

(iii)

a usury opinion or endorsement to the title policy acceptable to Lender if Lender reasonably believes that the Adjusted Interest Rate is or may be usurious; and

(iv)

a title search acceptable to Lender and reimbursement for Lender's costs incurred in obtaining the same.

2.

No privilege is reserved by Borrower to prepay any principal of this Note prior to the Maturity Date, except on or after the date hereof, privilege is reserved after giving thirty (30) days prior written notice to Lender and the lender under the Other Note, to prepay in full, but not in part, all principal and interest to the date of payment, along with all sums, amounts, advances or charges due under any instrument or agreement by which they are secured, upon the payment of a "Make Whole Premium" if required by the schedule below, provided that Borrower simultaneously exercises its right to prepay the Other Note as provided for therein.  The Make Whole Premium shall be based on the following schedule:

(i)

if prepayment occurs prior to March 1, 2008 or after February 1, 2010 and prior to March 1, 2011, the Make Whole Premium shall be one-half percent (.50%) of the principal amount to be prepaid;

(ii)

provided no Event of Default exists, during the period beginning on or after March 1, 2008 to and including February 1, 2010 or on or after March 1, 2011 to

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and including February 1, 2012 (each collectively the "Open Period") no Make Whole Premium shall be payable.

3.

Borrower agrees that if Lender accelerates the whole or any part of the principal sum evidenced hereby after the occurrence of an Event of Default but prior to the Open Period, Borrower waives any right to prepay said principal sum in whole or in part without premium and agrees to pay, as yield maintenance protection and not as a penalty, the Make Whole Premium.  

In the event any proceeds from a casualty or Taking of the Premises are applied to reduce the principal balance hereof, such reduction shall be made without a Make Whole Premium, provided no Event of Default then exists under the Loan Documents.

Borrower by adding its initials to the end of this paragraph, (A) expressly waives any rights it may have under California Civil Code Section 2954.10 to prepay this Note, in whole or in part, without penalty, upon acceleration of the Indebtedness and (B) acknowledges and agrees that Borrower has no right of prepayment of this Note, except as provided above; and that, if the maturity of this Note is accelerated by Lender, Borrower specifically agrees to pay as a prepayment premium, the applicable sum specified herein as the Make Whole Premium, specifically including but not limited to the case where the holder of this Note has accelerated the maturity of this note due to Borrower's default of any provision contained in 2(f) of the Deed of Trust.  By initialing this provision, Borrower hereby declares that Lender's agreement to make the Loan evidenced by this Note for the interest rate and for the term set forth in this Note con stitutes adequate consideration, given individual weight by Borrower, for this waiver and agreement.

Initials: ________________    ________________

4.

If any payment of principal, interest, or other Indebtedness is not made when due, damages will be incurred by Lender, including additional expense in handling overdue payments, the amount of which is difficult and impractical to ascertain.  Borrower therefor agrees to pay, upon demand, the sum of four cents ($.04) for each one dollar ($1.00) of each said payment which becomes overdue ("Late Charge") as a reasonable estimate of the amount of said damages, subject, however, to the limitations contained in paragraph 6 hereof.

Notwithstanding anything hereinabove to the contrary, the Late Charge assessed on any amount due on the Maturity Date or the Call Date (if Lender declares this Note and the Other Note due and payable as described hereinabove) but not then paid, whether or not by acceleration, shall not be four cents for each one dollar as described above, but shall instead be a sum equal to the interest which would have accrued on the principal balance then outstanding from the date the payment was due to the end of the month in which the Maturity Date or Call Date (if applicable) occurs.  Such Late Charge shall be in addition to interest otherwise accruing under this Note.

5.

If any Event of Default has occurred and is continuing under the Loan Documents, the entire principal balance of the Loan, interest then accrued, and Make Whole Premium, and all

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other Indebtedness whether or not otherwise then due, shall at the option of Lender, become immediately due and payable without demand or notice, and whether or not Lender has exercised said option, interest shall accrue on the entire principal balance, interest then accrued, Make Whole Premium and any other Indebtedness then due, at a rate equal to the Default Rate until fully paid.

6.

Notwithstanding anything herein or in any of the other Loan Documents to the contrary, no provision contained herein or therein which purports to obligate Borrower to pay any amount of interest or any fees, costs or expenses which are in excess of the maximum permitted by applicable law, shall be effective to the extent it calls for the payment of any interest or other amount in excess of such maximum.  All agreements between Borrower and Lender, whether now existing or hereafter arising and whether written or oral, are hereby limited so that in no contingency, whether by reason of demand for payment or acceleration of the maturity hereof or otherwise, shall the interest contracted for, charged or received by Lender exceed the maximum amount permissible under applicable law.  If, from any circumstance whatsoever, interest would otherwise be payable to Lender in excess of the maximum lawful amount, the interest payable to Lend er shall be reduced to the maximum amount permitted under applicable law; and if from any circumstance Lender shall ever receive anything of value deemed interest by applicable law in excess of the maximum lawful amount, an amount equal to any excessive interest shall, at the option of Lender, be refunded to Borrower or be applied to the reduction of the principal hereof, without a Make Whole Premium and not to the payment of interest or, if such excessive interest exceeds the unpaid balance of principal hereof such excess shall be refunded to Borrower.  This paragraph shall control all agreements between Borrower and Lender.

7.

Borrower and any endorsers or guarantors waive presentment, protest and demand, notice of protest, demand and dishonor and nonpayment, and agree the Maturity Date of this Note or any installment may be extended without affecting any liability hereunder, and further promise to pay all reasonable costs and expenses, including but not limited to, reasonable attorney's fees incurred by Lender in connection with any default or in any proceeding to interpret and/or enforce any provision of the Loan Documents.  No release of Borrower from liability hereunder shall release any other maker, endorser or guarantor hereof.

8.

This Note is secured by the Loan Documents creating among other things legal and valid encumbrances on and an assignment of all of Borrower's interest in any Leases of the Premises located in the county of San Mateo, State of California.  Capitalized terms used herein and not otherwise defined shall have those meanings given to them in the Loan Documents.  In no event shall such documents be construed inconsistently with the terms of this Note, and in the event of any discrepancy between any such documents and this Note, the terms hereof shall govern.  The proceeds of this Note are to be used for business, commercial, investment or other similar purposes, and no portion thereof will be used for any personal, family or household use.  This Note shall be governed by and construed in accordance with the laws of the State where the Premises is located, without regard to its conflict of law principles.

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9.

Notwithstanding any provision to the contrary in this Note or the Loan Documents and except as otherwise provided for below, the liability of Borrower under the Loan Documents shall be limited to the interest of Borrower in the Premises and the Rents.  In the event of foreclosure of the liens evidenced by the Loan Documents, no judgment for any deficiency upon the Indebtedness evidenced by the Loan Documents shall be sought or obtained by Lender against Borrower.  Nothing herein shall in any manner limit or impair (i) the lien or enforcement of the Loan Documents pursuant to the terms thereof or (ii) the obligations of any indemnitor or guarantor, if any.

Notwithstanding any provision hereinabove to the contrary, Borrower shall be personally liable to Lender for:

(a)

any loss or damage to Lender arising from (i) the sale or forfeiture of the Premises resulting from Borrower's failure to pay any of the taxes, assessments or charges specified in the Loan Documents or (ii) Borrower's failure to insure the Premises in compliance with the provisions of the Loan Documents;

(b)

any event or circumstance for which Borrower indemnifies Lender under the Environmental Indemnity;

(c)

nonpayment of taxes, assessments, insurance premiums and utilities for the Premises and any penalty or late charge associated with nonpayment thereof prior to the Sale (as defined below) of the Premises;

(d)

any loss or damage to the Premises as a result of waste, gross negligence or willful misconduct by Borrower;  

(e)

intentionally deleted;

Borrower's personal liability for items specified in (c) and (d) above shall be limited to the amount of rents, issues, proceeds and profits from the Premises ("Rents and Profits") received by Borrower for the twenty-four (24) months preceding an Event of Default and thereafter; but less any such Rents and Profits applied to (A) payment of principal, interest and other charges when due under the Loan Documents, or (B) payment of expenses for the operation, maintenance, taxes, assessments, utility charges and insurance of the Premises including sufficient reserves for the same or replacements or renewals thereof ("Operation Expense(s)") provided that (x) Borrower has furnished Lender with evidence reasonably satisfactory to Lender of the Operation Expenses and payment thereof, and (y) any payments to parties related to Borrower shall be considered an Operation Expense only to the extent that the amount expended for the Operation Expense does not exceed the then current market rate for such Operation Expense.

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(f)

misapplication or misappropriation of rents in violation of the Loan Documents;  

(g)

any security deposits of tenants not otherwise applied in accordance with the terms of the Lease(s), together with any interest on such security deposits required by law or the leases, not turned over to Lender upon conveyance of the Premises to Lender pursuant to foreclosure or power of sale or by a deed acceptable to Lender in form and content;

(h)

any loss or damage to Lender arising from the misapplication or misappropriation of tax reserve accounts, tenant improvement reserve accounts, security deposits, prepaid rents or other similar sums paid to or held by Borrower or any other entity or person in connection with Borrower’s operation of the Premises;

(i)

any insurance or condemnation proceeds or other similar funds or payments applied by Borrower in a manner other than as expressly provided in the Loan Documents;

(j)

any loss or damage to Lender arising from any fraud or willful misrepresentation by or on behalf of Borrower, Interest Owner or any guarantor regarding the Premises, the making or delivery of any of the Loan Documents or in any materials or information provided by or on behalf of Borrower, Interest Owner or guarantor, if any, in connection with the Loan; and

(k)

any loss or damage to Lender arising from the loss of Lender’s perfection or priority of its security interest in personal property or fixtures covered under any UCC financing statement due to Borrower’s failure to notify Lender as provided for in paragraph 1(h) of the Mortgage.

Notwithstanding anything contained in paragraphs 9(a)(i) and 9(c) hereinabove as it relates solely to taxes, assessments and insurance premiums, to the extent Lender is impounding for taxes, assessments and insurance premiums in accordance with the Loan Documents and Borrower has fully complied with all terms and conditions of the Loan Documents relating to impounding for the same, then Borrower shall not be personally liable for Lender's failure to apply any of said impound amounts held by Lender in accordance with the Loan Documents.

Notwithstanding anything to the contrary in the Loan Documents, the limitation on liability contained in the first paragraph of this paragraph 9 SHALL BECOME NULL AND VOID and shall be of no further force and effect in the event:

(y)

of any breach or violation of paragraph 2(f) (due on sale or encumbrance) of the Mortgage, other than (i) the filing of a nonmaterial mechanic's lien affecting the Premises or a mechanic's lien affecting the Premises for which Borrower has

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complied with the provisions of paragraph 1(e) of the Mortgage, or (ii) the granting of any utility or other nonmaterial easement or servitude burdening the Premises, or (iii) any transfer or encumbrance of a nonmaterial economic interest in the Premises not otherwise set forth in (i) or (ii), or (iv) an immaterial breach or violation of the Property Transfer Requirements, Ownership Transfer Requirements, Specific Transfer Requirements I-V or the Mezzanine Financing Requirements; or

(z)

of any filing by Borrower of a petition in bankruptcy or insolvency or a petition or answer seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under the Bankruptcy laws of the United States or under any other applicable federal, state or other statute or law.

10.

If more than one, all obligations and agreements of Borrower are joint and several.

11.

This Note may not be changed or terminated orally, but only by an agreement in writing and signed by the party against whom enforcement of any waiver, change, modification or discharge is sought.  All of the rights, privileges and obligations hereunder shall inure to the benefit of the heirs, successors and assigns of Lender and shall bind the heirs and permitted successors and assigns of Borrower.  

12.

If any provision of this Note shall, for any reason, be held to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision hereof, but this Note shall be construed as if such invalid or unenforceable provision had never been contained herein.

13.

This Note may be executed in counterparts, each of which shall be deemed an original; and such counterparts when taken together shall constitute but one agreement.

14.

This provision does not represent a commitment by Lender to lend additional dollars (the "Additional Advance") to Borrower, as Lender is under no obligation to make an Additional Advance. Borrower may request Lender to fund to Borrower an additional advance of principal ("Request for Advance"), provided the requested Additional Advance, in combination with the original Loan, meet certain "Minimum Economic Criteria" (set forth below).    

If Lender does choose to make an Additional Advance, the following conditions precedent must be satisfied:

The "Minimum Economic Criteria" are:

(a)

The combined outstanding Indebtedness on the original Loan and the Additional Advance does not exceed seventy-seven percent (77%) of the appraised value of the Premises as established by an appraisal of the Premises prepared by an MAI appraiser approved by Lender and in form and substance acceptable to Lender, said appraisal at Borrower's cost;

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(b)

Debt service of coverage of 1.20 times the annual debt service on the combined outstanding Indebtedness on the original Loan and the Additional Advance, as determined by Lender.  The debt service coverage shall be the annual net operating income divided by the total annual installment payments due under the combined outstanding Indebtedness on the original Loan and the Additional Advance, including accrued or capitalized interest.  Only net operating income from approved executed Leases in effect on the Premises with no uncured defaults shall be used in Lender's determination of the foregoing.  Borrower shall provide a certified rent roll with its Request for Advance; and

(c)

At the time of the Request for Advance, at least twelve (12) months must remain in the Loan term.

Provided no Event of Default exists under the Loan Documents, if Lender determines that the Minimum Economic Criteria are satisfied, Lender may notify Borrower in writing ("Lender's Notice") of the number of basis points ("Spread") and the United States Treasury Issue ("Treasury Issue") that Lender will use to establish the interest rate applicable to the Additional Advance ("AA Interest Rate").  The Spread shall be determined by the Lender, in its sole discretion.

At any time and from time to time before the date that the AA Interest Rate is agreed to, provided at least seven (7) days have elapsed since the previous Lender's Notice, Lender may establish a new Spread which Lender anticipates it will use to establish the AA Interest Rate and notify Borrower of the same.  The AA Interest Rate must be established by the date which is 30 days following the date of the initial Lender's Notice (the "AA Rate Set Deadline").  The AA Interest Rate may only be established on a date mutually agreed to by Lender and Borrower. If Borrower fails to respond to the most current Lender's Notice in writing by the AA Rate Set Deadline, all of the Lender's Notices shall be deemed rejected.  If Borrower rejects the terms set forth in the Lender's Notice, Borrower shall then have the right to obtain Mezzanine Financing on the terms set forth in the Mortgage.  If Borrower accepts the terms set forth in Lender's Notice, Lender shall agree to fund the Additional Advance, provided the following closing conditions ("Closing Conditions") are met:

(a)

Borrower's execution, delivery, acknowledgement and recordation, as applicable, of acceptable documentation evidencing and securing the Additional Advance including, but not limited to, additional note(s), revised and/or replacement loan modification agreements, indemnification agreements, escrow security or property reserve agreements, security instruments, financing statements, UCCs, new or revised letters of credit and/or guarantees in form and substance satisfactory to Lender;

(b)

Receipt of either (at Lender's discretion) a new ALTA standard loan policy or an endorsement updating the Lender's existing loan policy in the full amount of the Loan (as increased by the Additional Advance), in form and by an issuer satisfactory to Lender,

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and which insures the Mortgage to be a first and prior lien subject only to those exceptions which were previously approved by Lender and provides coverage against usury and mechanic's liens (an acceptable usury opinion can be substituted for the usury coverage);

(c)

Compliance with Lender's then current underwriting and closing due diligence requirements.

(d)

Receipt of acceptable third party reports addressing property physical and environmental condition, upon request of Lender, prepared by consultants acceptable to Lender;

(e)

Payment by Borrower of all third party expenses incurred, including but not limited to outside counsel fees and costs;

(f)

Payment of Borrower of an "Additional Advance Fee" equal to .5% of the amount of the Additional Advance.  The Additional Advance Fee is non-refundable and is due upon Borrower's acceptance of the terms set forth in the Lender's Notice.

In the event (i) Lender does not choose to make the Additional Advance; (ii) Borrower rejects the terms set forth in the Lender's Notice, or (iii) Borrower is unable to satisfy the Closing Conditions, Borrower shall have the ability to obtain Mezzanine Financing as more particularly described in paragraph 2(f) of the Mortgage.

(Signatures on next page)

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IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed and delivered as of the date first set forth above.

VMS NATIONAL PROPERTIES, an Illinois general partnership

By:

VMS NATIONAL RESIDENTIAL PORTFOLIO I, an Illinois limited partnership

By:

MAERIL, INC., a Delaware  

                        corporation, its general partner

By: /s/Patti K. Fielding

       Name:  Patti K. Fielding

                Title:  Executive Vice President  

                           and Treasurer

By:

VMS NATIONAL RESIDENTIAL PORTFOLIO II, an Illinois limited partnership

By:

MAERIL, INC., a Delaware  

                        corporation, its general partner

By: /s/Patti K. Fielding

       Name:  Patti K. Fielding

                Title:  Executive Vice President  

                                          and Treasurer

EX-10

EXHIBIT 10.37

Record and return to:

Principal Life Insurance Company

c/o Principal Real Estate Investors, LLC

801 Grand Avenue

Des Moines, IA  50392-1360

ATTN:  Erin Coghlan

DEED OF TRUST, SECURITY AGREEMENT

ASSIGNMENT OF RENTS AND FIXTURE FILING

THE NOTE SECURED BY THIS DEED OF TRUST CONTAINS AN

ADJUSTABLE INTEREST RATE

755498

A.

THIS DEED OF TRUST, SECURITY AGREEMENT AND ASSIGNMENT OF RENTS AND FIXTURE FILING (as the same may from time to time hereafter be modified, supplemented or amended, this "Deed of Trust") is made as of January 19, 2007, by and between VMS NATIONAL PROPERTIES, an Illinois general partnership, having its principal place of business and post office address at 4582 South Ulster Street Parkway, Suite 1100, Denver, Colorado 80237, as "Borrower" ("Borrower" to be construed as "Borrowers" if the context so requires), Brenda S. Tyler, of 801 Grand Avenue, Des Moines, Iowa, as "Trustee", and PRINCIPAL LIFE INSURANCE COMPANY, an Iowa corporation, as "Lender".

WITNESSETH:

B.

THAT Borrower is justly indebted to Lender for money borrowed (the "Loan") in the

principal sum of Forty-Nine Million and 00/100 Dollars ($49,000,000.00) (the "Loan Amount"),

evidenced by Borrower's secured promissory note in the principal amount of $29,000,000.00 and

Borrower's secured promissory note in the principal amount of $20,000,000.00, with each of said

notes bearing even date herewith, made payable and delivered to Lender (as may be modified,

amended, supplemented, extended or consolidated in writing and any note(s) issued in exchange

therefor or replacement thereof) (collectively, the "Note"), in which Borrower promises to pay to

Lender the Loan Amount, together with all accrued and unpaid interest thereon, interest accrued

at the Default Rate (if any), Late Charges (if any), the Make Whole Premium (if any), and all

other obligations and liabilities due or to become due to Lender pursuant to the Loan Documents

and all other amounts, sums and expenses paid by or payable to Lender pursuant to the Loan

Documents but excluding the Environmental Indemnity (collectively the "Indebtedness") until

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the Indebtedness has been paid, but in any event, the unpaid principal balance (if any) remaining

due on the Note shall be due and payable on February 1, 2012 (the "Maturity Date") or such

earlier date resulting from the acceleration of the Indebtedness by Lender.  Capitalized terms

used herein and not otherwise defined shall have those meanings given to them in the other Loan

Documents.  Each secured promissory note is equally and ratably secured by this Deed of Trust,

without priority of one over the other.  

C.

NOW, THEREFORE, to secure the payment of the Indebtedness in accordance with the terms and conditions of the Loan Documents, and all extensions, modifications, and renewals thereof and the performance of the covenants and agreements contained therein, and also to secure the payment of any and all other Indebtedness, direct or contingent, that may now or hereafter become owing from Borrower to Lender in connection with the Loan Documents, and in consideration of the Loan Amount in hand paid, receipt of which is hereby acknowledged, Borrower does by these presents irrevocably grant, transfer and assign in trust with power of sale and right of entry and possession unto Trustee, its successors and assigns forever, that certain real estate and all of Borrower's estate, right, title and interest therein, located in the county of San Mateo, state of California, more particularly described in Exhibit A attached hereto and made a part hereof (the "Land"), which Land, together with the following described property, rights and interests, is collectively referred to herein as the "Premises".

D.

Together with Borrower's interest as lessor in and to all Leases and all Rents, which are pledged primarily and on a parity with the Land and not secondarily.

E.

Together with all and singular the tenements, hereditaments, easements, appurtenances, passages, waters, water courses, riparian rights, direct flow, ditch, reservoir, well and other water rights, whether or not adjudicated, whether tributary or nontributary and whether evidenced by deed, water stock, permit or otherwise, sewer rights, rights in trade names, licenses, permits and contracts, and all other rights, liberties and privileges of any kind or character in any way now or hereafter appertaining to the Land, including but not limited to, homestead and any other claim at law or in equity as well as any after-acquired title, franchise or license and the reversion and reversions and remainder and remainders thereof.

F.

Together with the right in the case of foreclosure hereunder of the encumbered property for Lender to take and use the name by which the buildings and all other improvements situated on the Premises are commonly known and the right to manage and operate the said buildings under any such name and variants thereof.

G.

Together with all right, title and interest of Borrower in any and all buildings and improvements of every kind and description now or hereafter erected or placed on the said Land and all materials intended for construction, reconstruction, alteration and repairs of such buildings and improvements now or hereafter erected thereon, all of which materials shall be deemed to be included within the Premises immediately upon the delivery thereof to the Premises, and all fixtures now or hereafter owned by Borrower and attached to or contained in and used exclusively in connection with the Premises including, but not limited to, all machinery,

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motors, elevators, fittings, radiators, awnings, shades, screens, all gas and electric fixtures, appliances (including without limitation, ranges, rangetops, ovens, stoves, cooking apparatus and appurtenances, dishwashers, refrigerators, trash compactors, microwaves, washers, dryers, and garbage disposals), water heaters, mirrors, mantels, carpeting and all other floor coverings, window coverings and treatments, cable television equipment, water softeners, storm sashes, and all plumbing, heating, lighting, ventilating, refrigerating, incinerating, air-conditioning and sprinkler equipment and fixtures and appurtenances thereto; and all items of furniture, furnishings, equipment and personal property owned by Borrower used exclusively in the operation of the Premises; and all renewals or replacements of all of the aforesaid property owned by Borrower or articles in substitution therefor, whether or not the same are or shall be attached to said buildings o r improvements in any manner (collectively, the "Improvements"); it being mutually agreed, intended and declared that all the aforesaid property owned by Borrower and placed by it on the Land or used exclusively in connection with the operation or maintenance of the Premises shall, so far as permitted by law, be deemed to form a part and parcel of the Land and for the purpose of this Deed of Trust to be Land and covered by this Deed of Trust, and as to any of the property aforesaid which does not form a part and parcel of the Land or does not constitute a "fixture" (as such term is defined in the Uniform Commercial Code ("UCC")), this Deed of Trust and the other Loan Documents (the terms of which grant a security interest in personal property or real property, the proceeds of which may become personal property) are each hereby deemed to be, as well, a security agreement under the UCC for the purpose of creating a security interest in all items, including, but not limited to, all property and rights which Borrower may grant, assign, bargain, sell, transfer, set over, deliver, or otherwise convey to Lender, as secured party, under the terms of this Deed of Trust or any of the other Loan Documents, including any and all proceeds thereof (as used herein, Borrower shall mean "Debtor" under the UCC and Lender shall mean "Secured Party" under the UCC).  Borrower hereby appoints Lender as its attorney-in-fact to execute such documents necessary to perfect Lender's security interest and authorizes Lender at any time until the Indebtedness is paid in full, to prepare and file, at Borrower's expense, any and all UCC financing statements, amendments, assignments, terminations and the like, necessary to create and/or maintain a prior security interest in such property all without Borrower's execution of the same.  Furthermore, upon a default under the Loan Documents, Lender will, in addition to all other remedies provided for in the Loan Documents, have the remedies provided for under the UCC in effect in the state in which the Premises is located.

H.

Together with all right, title and interest of Borrower, now or hereafter acquired, in and to any and all strips and gores of land adjacent to and used in connection with the Premises and all right, title and interest of Borrower, now owned or hereafter acquired, in, to, over and under the ways, streets, sidewalks and alleys adjoining the Premises.  

I.

Together with all funds now or hereafter held by Lender under any property reserves agreement (including any proceeds derived from any letter of credit) or escrow security agreement or under any of the terms hereof or of the Loan Documents, including but not limited to funds held under the provisions of paragraph 5 hereof.

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J.

Together with all of Borrower's payment intangibles, letter of credit rights, interest rate cap agreements, tenant in common agreement rights, and any other contract rights of Borrower related in any manner to the ownership, operation, or management of the Premises, as well as any and all supporting obligations, and all proceeds, renewals, replacements and substitutions thereof.

K.

Together with all funds, accounts and proceeds thereof relating to the Premises whether or not such funds, accounts or proceeds thereof are held by Lender under the terms of any of the Loan Documents, including, but not limited to bankruptcy claims of Borrower against any tenant at the Premises, and any proceeds thereof; proceeds of any Rents, insurance proceeds from all insurance policies required to be maintained by Borrower under the Loan Documents and all awards, decrees, proceeds, settlements or claims for damage now or hereafter made to or for the benefit of Borrower by reason of any damage to, destruction of or taking of the Premises or any part thereof, whether the same shall be made by reason of the exercise of the right of eminent domain or by condemnation or otherwise (a "Taking").

L.

TO HAVE AND TO HOLD the same unto Trustee, Trustee's successors and assigns, upon the trusts, covenants and agreements herein expressed.  

M.

Borrower represents that it is the absolute owner in fee simple of the Premises described in Exhibit A, which Premises are free and clear of any liens or encumbrances except as set forth in the loan policy of title insurance for the Premises issued to Lender, and except for taxes which are not yet due or delinquent.  Borrower shall forever warrant and defend the title to the Premises against all claims and demands of all persons whomsoever and will on demand execute any additional instrument which may be required to give Trustee a valid first lien on all of the Premises, subject to the "Permitted Encumbrances" set forth in the loan policy of title insurance for the Premises issued to Lender.  

N.

Borrower further represents that (i) the Premises is not subject to any casualty damage; (ii) Borrower has not received any written notice of any eminent domain or condemnation proceeding affecting the Premises; (iii) all leasing broker fees and commissions payable by Borrower with respect to the Lease(s) have been paid in full, in cash or other form of immediately available funds; (iv) to the best of Borrower's knowledge, following due and diligent inquiry, there are no actions, suits or proceedings pending, completed or threatened against or affecting Borrower or any person or entity owning an interest (directly or indirectly) in Borrower ("Interest Owner(s)") or any property of Borrower or any Interest Owner in any court or before any arbitrator of any kind or before or by any governmental authority (whether local, state, federal or foreign) that, individually or in the aggregate, could reasonably be expected by Len der to be material to the transaction contemplated hereby and (v) the Premises and the intended uses thereof are in compliance with all applicable laws, regulations and ordinances, including without limitation, the Americans with Disabilities Act of 1990 (42 U.S.C. §12101, et seq.), the Federal Architectural Barriers Act (42 U.S.C. §3601, et seq.), the Fair Housing Amendments Act of 1988 (42 U.S.C. §3601, et seq.), and the Rehabilitation Act of 1973 (29 U.S.C. §794) and any amendments, modifications or supplements thereto.

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O.

Borrower further represents and warrants that as of the date hereof and until the Indebtedness is paid in full

(a)

Borrower and each person or entity owning an interest in Borrower is not and will not be (i) identified on the Specially Designated Nationals and Blocked Persons List maintained by the Office of Foreign Assets Control, Department of the Treasury ("OFAC") and/or on any other similar list maintained by OFAC pursuant to any authorizing statute, executive order or regulation (collectively, the "List"), (ii) a person or entity with whom a citizen of the United States is prohibited to engage in transactions by any trade embargo, economic sanction, or other prohibition of United States law, regulation, or Executive Order of the President of the United States;

(b)

none of the funds or other assets of Borrower constitute or will constitute property of, or are or will be beneficially owned, directly or indirectly, by any Embargoed Person (as hereinafter defined);

(c)

no Embargoed Person has or will have any interest of any nature whatsoever in Borrower (whether directly or indirectly);

(d)

none of the funds of Borrower have been or will be derived from any unlawful activity with the result that the investment in Borrower is prohibited by law or that the Loan Documents are in or will be in violation of law,

(e)

Borrower has and will continue to implement procedures, and has consistently and will continue to consistently apply those procedures, to ensure the foregoing representations and warranties remain true and correct at all times.  The term "Embargoed Person" means any person, entity or government subject to trade restrictions under U.S. law, including but not limited to, the International Emergency Economic Powers Act, 50 U.S.C. §1701 et seq., The Trading with the Enemy Act, 50 U.S.C. App. 1 et seq., and any Executive Orders or regulations promulgated thereunder with the result that the investment in Borrower is prohibited by law or Borrower is in violation of law;

(f)

Borrower has complied and will continue to comply with all requirements of law relating to money laundering, anti-terrorism, trade embargos and economic sanctions, now or hereafter in effect;

(g)

Borrower has not and will not use funds from any "Prohibited Person" (as such term is defined in the September 24, 2001 Executive Order Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism) to make any payment due to Lender under the Loan Documents

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Borrower will immediately notify Lender in writing if any of the representations, warranties or covenants are no longer true or have been breached or if Borrower has a reasonable basis to believe that they may no longer be true or have been breached.  In addition, Borrower will, at the request of Lender, provide such information as may be requested by Lender to determine Borrower's compliance with the terms hereof.

P.

Borrower further represents and warrants that as of the date hereof and until the Indebtedness is paid in full: (i) Borrower is not and will not be an "employee benefit plan" as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), which is subject to Title I of ERISA; (ii) the assets of Borrower do not and will not constitute "plan assets" of one or more such plans for purposes of Title I of ERISA; (iii) Borrower is not and will not be a "governmental plan" within the meaning of Section 3(32) of ERISA; (iv) transactions by or with Borrower are not and will not be subject to state statutes applicable to Borrower regulating investments of and fiduciary obligations with respect to governmental plans; (v) Borrower has made and will continue to make all required contributions to all employee benefit plans, if any, established for or on behalf of Borrower or to which Borrower is required to contribute; (vi) Borrower has and will continue to administer each such plan, if any, in accordance with its terms and the applicable provisions of ERISA and any other federal or state law; and (vii) Borrower has not and will not permit any liability under Sections 4201, 4243, 4062 or 4069 of Title IV of ERISA or taxes or penalties relating to any employee benefit plan or multi-employer plan to become delinquent or assessed, respectively, which would have a material adverse effect upon (i) the business or the financial position or results of operation of Borrower, (ii) the ability of Borrower to perform, or of Lender to enforce, any of the Loan Documents or Environmental Indemnity, or (iii) the value of the Premises.

BORROWER COVENANTS AND AGREES AS FOLLOWS:  

1.

Borrower shall

(a)

pay each item of Indebtedness secured by this Deed of Trust when due according to the terms of the Loan Documents;

(b)

pay a Late Charge on any payment of principal, interest, Make Whole Premium or Indebtedness which is not paid on or before the due date thereof to cover the expense involved in handling such late payment;

(c)

pay on or before the due date thereof any indebtedness permitted to be incurred by Borrower pursuant to the Loan Documents and any other claims which could become a lien on the Premises (unless otherwise specifically addressed in paragraph 1(e) hereof), and upon request of Lender exhibit satisfactory evidence of the discharge thereof;

(d)

complete within a reasonable time, the construction of any Improvements now or at any time in process of construction upon the Land;

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(e)

manage, operate and maintain the Premises and keep the Premises, including but not limited to, the Improvements, in good condition and repair and free from mechanics' liens or other liens or claims for liens, provided however, that Borrower may in good faith, with reasonable diligence and upon written Notice to Lender within thirty (30) days after Borrower has knowledge of such lien or claim, contest the validity or amount of any such lien or claim and defer payment and discharge thereof during the pendency of such contest in the manner provided by law, provided that (i) such contest may be made without the payment thereof; (ii) such contest shall prevent the sale or forfeiture of the Premises or any part thereof, or any interest therein, to satisfy such lien or claim; (iii) Borrower shall have obtained a bond over such lien or claim from a bonding company acceptable to Lender which has the effect of removing such lien or collection of the claim or lien so contested; and (iv) Borrower shall pay all costs and expenses incidental to such contest; and further provided, that in the event of a final, non-appealable ruling or adjudication adverse to Borrower, Borrower shall promptly pay such claim or lien, shall indemnify and hold Lender and the Premises harmless from any loss or damage arising from such contest and shall take whatever action necessary to prevent sale, forfeiture or any other loss or damage to the Premises or to the Lender;  

(f)

comply, and cause each lessee or other user of the Premises to comply, with all requirements of law and ordinance, and all rules and regulations, now or hereafter enacted, by authorities having jurisdiction of the Premises and the use thereof, including but not limited to all covenants, conditions and restrictions of record pertaining to the Premises, the Improvements, and the use thereof (collectively, "Legal Requirements");

(g)

subject to the provisions of paragraph 6 hereof, promptly repair, restore or rebuild any Improvements now or hereafter a part of the Premises which may become damaged or be destroyed by any cause whatsoever, so that upon completion of the repair, restoration and rebuilding of such Improvements, there will be no liens of any nature arising out of the construction and the Premises will be of substantially the same character and quality as it was prior to the damage or destruction;

(h)

if other than a natural person, do all things necessary to preserve and keep in full force and effect its existence, franchises, rights and privileges under the laws of the state of its formation and, if other than its state of formation, the state where the Premises is located.  Borrower shall notify Lender at least thirty (30) days prior to (i) any relocation of Borrower's principal place of business to a different state or any change in Borrower's

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state of formation, and/or (ii) if Borrower is an individual, any relocation of Borrower's principal residence to a different state;

(i)

do all things necessary to preserve and keep in full force and effect Lender's title insurance coverage insuring the lien of this Deed of Trust as a first and prior lien, subject only to the Permitted Encumbrances stated in the title insurance policy issued to Lender and any other exceptions after the date of this Deed of Trust approved in writing by Lender, including without limitation, delivering to Lender not less than 30 days prior to the effective date of any rate adjustment, modification or extension of the Note or any other Loan Document, any new policy or endorsement which may be reasonably required to assure Lender of such continuing coverage;

(j)

execute any and all documents which may be required to perfect the security interest granted by this Deed of Trust; and

(k)

comply and cause the Premises and the intended uses thereof to comply with all laws, rules, and regulations affecting the Premises or any portion thereof or any use thereof and, upon request by Lender, provide Lender with such evidence as may be reasonably required by Lender to confirm such compliance, such evidence to include, without limitation, letters, licenses, permits, certificates and other correspondence from the appropriate governmental authorities, and opinions or certifications from architects or engineers.  The laws, regulations and ordinances with which compliance should be evidenced include, in addition to the foregoing and without limitation, the following:  building codes, health and environmental protection laws, erosion control ordinances, federal statutes, doing business and/or licensing laws and zoning laws (the evidence submitted as to zoning should include the zoning designation made for the Premises, the permitted uses of the Premises under such zoning designation and zoning requirements as to parking, lot size, ingress, egress and building setbacks).

(l)

deliver to Lender, at Borrower’s expense, on March 1, 2009, a mold investigation report prepared by a consultant acceptable to Lender which, among other things, details the then current condition of the Premises with regard to any allergen, irritant, mold, fungus, bacteria, contaminate or similar substance or material as well as current and historic compliance of the Premises with the AIMCO Risk Management Mold and Mildew Guidelines dated June 24, 2003.  The mold investigation report shall be subject to Lender’s review and approval.

(m)

in the event Permitted Transfer (viii) of paragraph 2(f) occurs, remain a Single-Asset Entity;  

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As used herein, the term Single-Asset Entity means:

a corporation, limited or general partnership, limited liability company, or business trust which, at all times until the Indebtedness is paid in full (i) will not have any other assets other than the Premises, cash and marketable securities, and (ii) will not create, assume, incur, guarantee or become liable for debt, obligations, or performance of obligations for the benefit of any other person or entity except for liabilities incurred in the normal operation of the Premises (other than liabilities secured by the Premises).

2.

Borrower shall not:

(a)

except as required by applicable Legal Requirements, construct any building or structure nor make any alteration or addition (other than normal repair and maintenance) to (i) the roof or any structural component of any Improvements on the Premises, or (ii) the building operating systems, including but not limited to, the mechanical, electrical, heating, cooling, or ventilation systems (other than replacement with equal or better quality and capacity), without the prior written consent of Lender not to be unreasonably withheld;

(b)

remove or demolish any material Improvements, or any portion thereof, which at any time constitutes a part of the Premises.

Notwithstanding anything hereinabove to the contrary, Borrower may construct, remove or demolish tenant improvements within the then existing building(s) or other structures to the extent such work is required solely under the terms of any Leases approved by Lender provided (i) no Event of Default exists under the Loan Documents; (ii) the work is completed on a timely basis, in a good, workmanlike, lien-free manner and in accordance with all Legal Requirements, and (iii) such work does not negatively affect the structural integrity of the Improvements or the value of the Premises;

(c)

cause or permit any change to be made in the general use of the Premises without Lender's prior written consent;

(d)

initiate any or acquiesce to a zoning reclassification or material change in zoning without Lender's prior written consent.  Borrower shall use all reasonable efforts to contest any such zoning reclassification or change;

(e)

make or permit any use of the Premises that could with the passage of time result in the creation of any right of use, or any claim of adverse

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possession or easement on, to or against any part of the Premises in favor of any person or entity or the public;

(f)

allow any of the following to occur (unless a Permitted Transfer):

(i)

a Transfer of all or any portion of the Premises or any interest in the Premises;

(ii)

a Transfer of any ownership interest in Borrower or any entity which owns, directly or indirectly, an interest in Borrower at any level of the ownership structure; or

(iii)

in addition to (i) and (ii) above, if the Borrower is a trust, or if a trust owns an interest, directly or indirectly, in any entity which owns an interest in Borrower at any level of the ownership structure, the addition, deletion or substitution of a trustee of such trust.  

If any of such events occur, it shall be null and void and shall constitute an Event of Default under the Loan Documents.

It is understood and agreed that the Indebtedness evidenced by the Note is personal to Borrower and in accepting the same Lender has relied upon what it perceived as the willingness and ability of Borrower to perform its obligations under the Loan Documents and the Environmental Indemnity and as lessor under the Leases of the Premises.  Furthermore, Lender may consent to a Transfer and expressly waive Borrower's covenants contained in this paragraph 2(f), in writing to Borrower; however any such consent and waiver shall not constitute any consent or waiver of such covenants as to any Transfer other than that for which the consent and waiver was expressly granted.  Furthermore, Lender's willingness to consent to any Transfer and waive Borrower's covenants contained in this paragraph 2(f), implies no standard of reasonableness in determining whether or not such consent shall be granted and the same may be based upon what Lend er solely deems to be in its best interest.

For purposes of the Loan Documents, the following terms shall have the respective meanings set forth below:

"Transfer" or "Transferred" shall mean with respect to the Premises, an interest in the Premises, or an ownership interest or interest therein:

(i)

a sale, assignment, transfer, conveyance or other disposition (whether voluntary, involuntary or by operation of law);

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(ii)

the creation, sufferance or granting of any lien, encumbrance, security interest or collateral assignment (whether voluntarily, involuntarily or by operation of law), other than the lien hereof, the leases of the Premises assigned to Lender, the Permitted Encumbrances and those liens which Borrower is contesting in accordance with the provisions of paragraph 1(e);

(iii)

the issuance or other creation of ownership interests in an entity;

(iv)

the reconstitution or conversion from one entity to another type of entity;

(v)

a merger, consolidation, reorganization or any other business combination; or

(vi)

a conversion to or operation of all or any portion of the Premises as a cooperative or condominium form of ownership.

"Permitted Transfer" shall mean:

(i)

a minor (as determined by Lender) conveyance of an interest in the Premises by Borrower, such as a utility easement, and for which Lender has given its prior written consent and imposed such conditions as Lender deems advisable and appropriate;

(ii)

a sale, assignment, transfer or conveyance of all or any portion of the Premises or an interest in the Premises for which Borrower has complied with all of the Property Transfer Requirements;

(iii)

any of the following Transfers for which Borrower has complied with all of the Ownership Transfer Requirements as applicable and Lender has given its prior written consent (and in connection with such consent, Lender may impose any conditions it wishes in its reasonable discretion);

(A)

a sale, assignment, transfer, or conveyance of an ownership interest or interest therein;

(B)

the issuance or other creation of ownership interests in an entity;

(C)

a reconstitution or conversion from one entity to another type of entity;

(D)

a merger, consolidation, reorganization or any other business combination;

(iv)

transfers of general partner interest in Borrower between VMS National Residential Portfolio I and VMS National Residential Portfolio II ("Borrower Interest Owners") for which Borrower has complied with all of the Specific Transfer Requirements I;

(v)

transfers of general partner interests in Borrower that represent less than 49%, individually or in the aggregate, of all ownership interests in Borrower to individuals or entities other than Borrower

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Interest Owners for which Borrower has complied with all of the Specific Transfer Requirements II;

(vi)

Borrower's right to obtain mezzanine financing for which Borrower has complied with all the Mezzanine Financing Requirements;

(vii)

any assumption of less than 100% of the limited partnership interests in Borrower Interest Owners by any affiliate of AIMCO REIT for which Borrower has complied with all of the Specific Transfer Requirements III;

(viii)

conversion of the Borrower to a Single Asset Entity (as defined in paragraph 1(l)) wholly owned by AIMCO REIT and/or AIMCO OP and transfer of the Premises to said Single Asset Entity for which Borrower has complied with all of the Specific Transfer Requirements IV;

(ix)

a transfer of any general partnership interest in Borrower to a Qualified REIT Subsidiary, as defined in Section 856(i)(2) of the Internal Revenue Code of 1986, 100% owned by AIMCO REIT or to a Qualified REIT Subsidiary, as defined in Section 856(e)(1) of the Internal Revenue Code of 1986, 100% owned by AIMCO OP for which Borrower has complied with all of the Specific Transfer Requirements V;

(ix)

a transfer of shares of common stock, limited partnership interests or other beneficial or ownership interests or other forms of securities in AIMCO REIT or AIMCO OP (defined below), and the issuance of all varieties of convertible debt, equity and other similar securities of AIMCO REIT or AIMCO OP, and the subsequent transfer of such securities; provided, however, that no Change of Control (defined below) occurs as a result of such transfer, either upon such transfer or upon the subsequent conversion to equity of such convertible debt or other securities.

(x)

The issuance by AIMCO REIT or AIMCO OP of additional common stock, limited partnership interests or other beneficial or ownership interests, convertible debt, equity and other similar securities, and the subsequent transfer of such convertible debt or securities; provided, however, that no Change of Control occurs as the result of such transfer, either upon such transfer or upon the subsequent conversion to equity of such convertible debt or other securities.

(xi)

So long as AIMCO REIT owns 100% of the stock of AIMCO-LP, Inc. and AIMCO-GP, Inc. (and AIMCO-GP, Inc. remains the general partner of AIMCO OP), a transfer of limited partnership interests that results in AIMCO-LP, Inc. owning not less than 50.1% of the limited partnership interests in AIMCO OP.

For purposes of this Permitted Transfer Section, the following terms shall

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be defined as follows:

(A)

"Change of Control" shall mean the earliest to occur of (1) the date an Acquiring Person becomes (by acquisition, consolidation, merger or otherwise), directly or indirectly, the beneficial owner of more than forty percent (40%) of the total Voting Equity Capital of AIMCO REIT then outstanding, or (2) the date on which AIMCO REIT shall cease to hold (whether directly or indirectly through a wholly owned intermediary entity such as AIMCO-LP, Inc. or AIMCO-GP, Inc.) at least 50.1% of the limited partnership interests in AIMCO OP, or (3) the date on which AIMCO REIT shall cease for any reason to hold (whether directly or indirectly) (i) the interests in the Managing General Partner held as of the date of this Deed of Trust (as evidenced by organizational charts and documents submitted to Lender as of such date) and (ii) the Controlling Interest(s) in the Borrower, or (4) the replacement (other than solely by reason of retireme nt at age sixty-five or older, death or disability) of more than 50% (or such lesser percentage as is required for decision making by the board of directors of trustees, if applicable) of the members of the board of directors (or trustee, if applicable) of AIMCO REIT over a one-year period where such replacement shall not have been approved by a vote of at least a majority of the board of directors (or trustees, if applicable) of AIMCO REIT then still in office who either were members of such board of directors (or trustees, if applicable) at the beginning of such one year period or whose election as members of the board of directors (or trustees, if applicable) was previously so approved.

(B)

"Acquiring Person" shall mean a "person" or, group of "persons" within the meaning of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended. However, notwithstanding the foregoing, "Acquiring Person" shall not be deemed to include any member of the Borrower Control Group unless such member has, directly or indirectly, disposed of, sold or otherwise transferred to, or encumbered or restricted (whether by means of voting trust agreement or otherwise) for the benefit of an Acquiring Person, all or any portion of the Voting Equity Capital of AIMCO RElT directly or indirectly owned or controlled by such member or such member directly or

-14-

indirectly votes all or any portion of the Voting Equity Capital of AIMCO REIT, directly or indirectly, owned or controlled by such member for the taking of any action which, directly or indirectly constitutes or would result in a Change of Control, in which event such member of the Borrower Control Group shall be deemed to constitute an Acquiring Person to the extent of the Voting Equity Capital of AIMCO REIT owned or controlled by such member.

(C)

"Borrower Control Group" shall mean a majority of the Board of Directors of AIMCO REIT.

(D)

A "Person" shall mean an individual, an estate, a trust, a corporation, a partnership, a limited liability company or any other organization or entity (whether governmental or private).

(E)

"Security" shall have the same meaning as in Section 2(1) of the Securities Act of 1933, as amended.

(F)

"Controlling Interest(s)" shall mean (i) with respect to a partnership, such majority and/or managing general partner interests which, together with a majority of limited partnership interests if necessary for consent purposes, vest in the holder of such interests the sale power, right and authority to control the day to day operations of the Borrower; including, without limitation, the authority to manage, operate and finance the Premises, (ii) with respect to a corporation, the number of shares which entitle the holder to elect a majority of the board of directors of the Borrower, and (iii) with respect to a limited liability company, such majority and/or managing member interests as vest in the holder of such interests the sole power, right and authority to control the day to day operations of the Borrower; including, without limitation, the authority to manage, operate and finance the Premises.

(G)

"AIMCO REIT" shall mean Apartment Investment and Management Company, a corporation organized and existing under the laws of the State of Maryland.

(H)

"AIMCO OP" shall mean AIMCO Properties, L.P., a limited partnership organized and existing under the laws of the State of Delaware.

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(I)

"Managing General Partner" shall mean the entity executing this Deed of Trust on behalf of the Borrower and/or its successors or assigns in interest.

(J)

"Voting Equity Capital" shall mean securities of any class or classes, the holders of which are ordinarily, in the absence of contingencies, entitled to elect a majority of the board of directors (or Persons performing similar functions).

"Property Transfer Requirements" are all of the following:

1.

Prior review and approval of the proposed purchaser or other transferee and the subject transaction by Lender, at Lender's reasonable discretion.  Review of the proposed purchaser or other transferee and the subject transaction shall encompass various factors, including, but not limited to, the proposed purchaser's or other transferee's creditworthiness, financial strength, and real estate management and leasing expertise as well as the proposed transaction's effect on the Premises, the Borrower, and other security for the Loan;

2.

Payment to Lender of an assumption fee equal to one percent (1%) of the principal balance of the Note; provided, however, that Lender will require up to $15,000.00 of such fee to be paid at the beginning of Lender's review process, and such sum shall be nonrefundable and earned upon receipt by Lender whether or not the transaction is ultimately completed or Lender ultimately approves the proposed purchaser or other transferee;

3.

Receipt, at Borrower's expense, of either (at Lender's discretion) a new ALTA standard loan policy or an endorsement updating the Lender's existing loan policy in the full amount of the Loan, in form and by an issuer satisfactory to Lender, and which insures this Deed of Trust to be a first and prior lien subject only to those exceptions which were previously approved by Lender and provides coverage against usury and mechanic's liens;

4.

Receipt by Lender of copies of all relevant information and documentation relating to or required by Lender in connection with the proposed transfer including but not limited to (a) the organizational documents of the proposed transferee and an opinion of counsel satisfactory to Lender as to its due formation,

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valid existence and authority to enter into and carry out the proposed transaction; (b) the deeds or other instruments of transfer and documents relating to the assignment and assumption of Leases; (c) evidence of compliance with the insurance requirements contained in the Loan Documents; and (d) compliance with such other closing requirements as are customarily imposed by Lender in connection with such transactions;

5.

Execution, delivery, acknowledgment and recordation, as applicable, of new, revised and/or replacement assumption agreements, loan modification agreements, indemnification agreements, escrow security or property reserves agreements, security instruments, financing statements, UCCs, new or revised letters of credit and/or guarantees in form and substance reasonably satisfactory to Lender;

6.

Payment of outside counsel fees and costs, other applicable professional's fees and costs, taxes, recording fees and the like, and any other fees and costs incurred; and

7.

Receipt by Lender of 60 days advance written notice of the proposed Transfer in question.

"Ownership Transfer Requirements" are all of the Property Transfer Requirements which Lender deems appropriate in its reasonable discretion, as well as a reasonable processing fee to be determined by Lender; provided, however, that (i) with respect to item 2 of the Property Transfer Requirements, the 1% fee shall be prorated (subject, however, to a $15,000 minimum) based on Lender's calculation of the effective percentage interest in Borrower transferred, and (ii) item 3 of the Property Transfer Requirements shall be required, at Lender's reasonable discretion, only in the event of (A) a merger, consolidation, reorganization or any other business combination, or (B) a reconstitution or conversion from one entity to another type of entity.

"Specific Transfer Requirements I" are all of the following:  

1.

AIMCO REIT (as defined below) and/or AIMCO OP (as defined below) (collectively) retain 20% indirect ownership interest in and retain management and control of Borrower and there is no change in the management and day-to-day operations at the Premises, unless otherwise approved by Lender;

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2.

Lender receives notice of such transfer within thirty (30) days of the consummation of such transfer; and

3.

Lender receives an organizational chart for Borrower which includes ownership breakdowns for all entity levels and is certified by Borrower as true and correct.

Specific Transfer Requirements II are all of the following:

1.

AIMCO REIT and/or AIMCO OP (collectively) retain 20% indirect ownership interest in and retain management and control of Borrower and there is no change in the management and day-to-day operations at the Premises, unless otherwise approved by Lender;

2.

Lender receives notice of such transfer within thirty (30) days of the consummation of such transfer along with the organizational documents of the transferee;

3.

At Lender's option, Lender receives an acceptable background and credit check, at Borrower's cost, for the proposed transferee if said proposed transferee's interest in Borrower will equal or exceed 20%;

4.

At Lender's option, Lender receives an acceptable OFAC report (research of the Office of Foreign Assets Control "Watched" companies list), at Borrower's cost;

5.

Lender receives an organizational chart for Borrower which includes ownership breakdowns for all entity levels and is certified by Borrower as true and correct; and

6.

Lender receives payment of an assumption fee equal to the greater of: (a) one-half percent (0.5%) of the outstanding principal balance of the Note prorated based on Lender's calculation of the effective percentage interest in Borrower transferred; or (b) $3,000.00.

Specific Transfer Requirements III are all of the following:

1.

AIMCO REIT and/or AIMCO OP (collectively) retain 20% indirect ownership interest in and retain management and control of Borrower and there is no change in the management and day-to-day operations at the Premises, unless otherwise approved by Lender;

2.

Lender receives notice of such transfer within thirty (30) days of the consummation of such transfer;

3.

Lender receives an organizational chart for Borrower which includes ownership breakdowns for all entity levels and is certified by Borrower as true and correct; and

4.

Lender receives a processing fee of $500.00.

Specific Transfer Requirements IV are all of the following:

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1.

Property Transfer Requirements 3-7; and

2.

Lender receives a processing fee of $3,000.00.

Specific Transfer Requirements V are all of the following:

1.

AIMCO REIT and/or AIMCO OP (collectively) retain 20% indirect ownership interest in and retain management and control of Borrower and there is no change in the management and day-to-day operations at the Premises, unless otherwise approved by Lender;

2.

Lender receives notice of such transfer within thirty (30) days of the consummation of such transfer along with the organizational documents of the transferee;

3.

At Lender's option, Lender receives an acceptable background and credit check, at Borrower's cost, for the proposed transferee if said proposed transferee's interest in Borrower will equal or exceed 20%;

4.

At Lender's option, Lender receives an acceptable OFAC report (research of the Office of Foreign Assets Control "Watched" companies list), at Borrower's cost;

5.

Lender receives an organizational chart for Borrower which includes ownership breakdowns for all entity levels and is certified by Borrower as true and correct; and

6.

Lender receives payment of a processing fee of $1,000.00.

"Mezzanine Financing Requirements" are all of the following:

(i)

no Event of Default has occurred under the Loan Documents;

(ii)

the mezzanine borrower may not be Borrower;

(iii)

the mezzanine debt is used solely to reimburse the mezzanine borrower for the costs associated with the repair and/or improvement of the Premises subject to the terms and conditions of the Loan Documents;

(iv)

the combined outstanding Indebtedness on the Loan and proposed mezzanine financing does not exceed eighty percent (80%) of the appraised value of the Premises as calculated by Lender at the time of funding of the mezzanine financing or at Lender's option as established by an appraisal of the Premises prepared by an MAI appraiser approved by Lender and in form and substance acceptable to Lender, which appraisal shall be paid for by Borrower;

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(v)

a minimum of 1.05 debt service coverage, based on a 30-year amortization schedule, is maintained.  The debt service coverage shall be the annual net cash flow (annual net operating income after deduction for tenant improvements, leasing commissions, annual replacement reserves and a management fee) divided by the total annual installment payments due under the Note secured hereby and on any proposed mezzanine financing including accrued or capitalized interest.  Only net operating income from approved executed leases in effect on the Premises with no uncured defaults shall be used in Lender's determination of the annual net cash flow;  

(vi)

the only security for the mezzanine financing is a pledge of ownership interests in Borrower or an owner of Borrower, directly or indirectly and such financing does not encumber nor result in any lien or charge upon or against the Premises or the Rents; and

(vii)

Lender's reasonable approval of the mezzanine lender as well as any successor or assign of mezzanine lender, any of which must be an institutional lender;

(viii)

Lender's reasonable approval of the mezzanine financing loan documents;

(ix)

Execution by the mezzanine lender of an inter-creditor agreement in form and substance acceptable to Lender;

(x)

neither Guarantor nor Borrower may be a guarantor of the mezzanine financing;

(xi)

at Lender's option, if required by the procedures promulgated by any rating agency(s) associated with a securitization transaction, evidence in writing to the effect that such mezzanine financing will not result in a re-qualification, reduction or withdrawal of any rating in effect immediately prior to the obtaining of the mezzanine financing issued in connection with the applicable securitization transaction;

(xii)

Borrower pays to Lender a reasonable fee for the handling and processing of such financing and reimburses Lender for all costs and expenses incurred by Lender, including but not limited to outside counsel fees and costs; and

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(xiii)

the right to obtain mezzanine debt is personal to VMS National Properties and any successor borrower directly or indirectly wholly owned by AIMCO REIT and/or AIMCO OP and may not be exercised by any successor or assign of Borrower other than a successor borrower directly or indirectly wholly owned by AIMCO REIT and/or AIMCO OP.

(g)

allow all or any portion of the Premises to be operated as or converted to a cooperative or condominium form of ownership;

(h)

amend, alter, modify, terminate or assign that certain Property Management Agreement by and between Borrower, and NHPMN Management, LP dated January 1, 2003 as amended by Amendment of Management Agreement dated November 9, 2006, now in existence or any subsequent agreement hereafter entered into with respect to the Premises (the "Property Management Agreement");

(i)

permit the property and leasing manager to assign or sell the Property Management Agreement; or

(j)

replace the current property and leasing manager or Property Management Agreement without the prior consent of Lender.

3.

(a)

Borrower shall pay or cause to be paid when due and before any penalty attaches or interest accrues all general taxes, special taxes, assessments (including assessments for benefits from public works or improvements whenever begun or completed), utility charges, water charges, sewer service charges, common area maintenance charges, if any, vault or space charges and all other like charges against or affecting the Premises or against any property or equipment located on the Premises, or which might become a lien on the Premises, and shall, within 15 days following Lender's request, furnish to Lender a duplicate receipt of such payment.  If any such tax, assessment or charge may legally be paid in installments, Borrower may, at its option, pay such tax, assessment or charge in installments.  

(b)

If Borrower desires to contest any tax, assessment or charge relating to the Premises, Borrower may do so by paying the same in full, under protest, in the manner provided by law; provided, however, that

(i)

if contest of any tax, assessment or charge may be made without the payment thereof, and

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(ii)

such contest shall have the effect of preventing the collection of the tax, assessment or charge so contested and the sale or forfeiture of the Premises or any part thereof or any interest therein to satisfy the same,

then Borrower may in its discretion and upon the giving of written notice to Lender of its intended action and upon the furnishing to Lender of such security or bond as Lender may require, contest any such tax, assessment or charge in good faith and in the manner provided by law.  All costs and expenses incidental to such contest shall be paid by Borrower.  In the event of a ruling or adjudication adverse to Borrower, Borrower shall promptly pay such tax, assessment or charge.  Borrower shall indemnify and save harmless the Lender and the Premises from any loss or damage arising from any such contest and shall, if necessary to prevent sale, forfeiture or any other loss or damage to the Premises or to Lender, pay such tax, assessment or charge or take whatever action is necessary to prevent any sale, forfeiture or loss.  

4.

(a)

Borrower shall at all times keep or cause to be kept in force (i) property insurance insuring all Improvements which now are or hereafter become a part of the Premises for perils covered by a causes of loss-special form insurance policy, including coverage against terrorism and containing replacement cost, ordinance and law and agreed amount endorsements or equivalent coverage; (ii) commercial general liability insurance naming Lender as an additional insured protecting Borrower and Lender against liability for bodily injury or property damage occurring in, on or adjacent to the Premises, with a combined single limit of not less than One Million Dollars ($1,000,000) per occurrence with not less than a Two Million Dollar ($2,000,000) aggregate limit and excess umbrella liability insurance of not less than Fifteen Million Dollars ($15,000,000); (iii) boiler and machinery insurance if the property has a boiler or is an office building; (iv) rental value insurance for the perils specified herein for one hundred percent (100%) of the Rents (including operating expenses, real estate taxes, assessments and insurance costs which are lessee's liability) for a period of twelve (12) months; (v) builders risk insurance during all periods of construction; and (vi) insurance against all other hazards as may be reasonably required by Lender, including, without limitation, insurance against loss or damage by flood.

(b)

All insurance (including deductibles and exclusions) shall be in form, content and amounts reasonably approved by Lender and written by an insurance company or companies approved by Lender and rated A-, class size VIII or better in the most current issue of Best's Insurance Reports and which is licensed to do business in the state in which the Premises are

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located or a governmental agency or instrumentality approved by Lender.  The policies for such insurance shall have attached thereto standard mortgagee clauses in favor of and permitting Lender to collect any and all proceeds payable thereunder and shall include a 30 day (except for nonpayment of premium, in which case, a 10 day) notice of cancellation clause in favor of Lender.  All certificates of insurance (or duplicate originals of policies if requested by Lender) shall be delivered to and held by Lender as further security for the payment of the Note and any other obligations arising under the Loan Documents, with evidence of renewal coverage delivered to Lender at least 30 days before the expiration date of any policy.  Borrower shall not carry or permit to be carried separate insurance, concurrent in kind or form and contributing in the event of loss, with any insurance required in the Loan Documents.

5.

(a)

Upon the occurrence of an Event of Default, Borrower shall deposit with and pay to Lender, on each payment date specified in the Note, sums calculated by Lender for payment of the following as they become due and payable:  (i) the estimated taxes and assessments assessed or levied against the Premises, and (ii) the estimated premiums for insurance required by the Loan Documents, excluding commercial general liability insurance.  Lender shall use such deposits to pay the taxes, assessments and premiums when the same become due.  Borrower shall procure and deliver to Lender, in advance, statements for such charges.  If the total payments made by Borrower under this paragraph exceed the amount of payments actually made by Lender for taxes, assessments and insurance premiums, such excess shall be credited by Lender on subsequent deposits to be made by Borrower.  If, however, the deposits are insufficient to pay t he taxes, assessments and insurance premiums when the same shall be due and payable, Borrower will pay to Lender any amount necessary to make up the deficiency, five (5) business days before the date when payment of such taxes, assessments and insurance premiums shall be due.  If at any time Borrower shall tender to Lender, in accordance with the provisions of the Note secured by this Deed of Trust, full payment of the entire Indebtedness represented thereby, Lender shall, in computing the amount of such Indebtedness, credit to the account of Borrower any balance remaining in the funds accumulated and held by Lender under the provisions of this paragraph.  If there is an Event of Default resulting in a public sale of the Premises, or if Lender otherwise acquires the Premises after an Event of Default, Lender shall apply, at the time of commencement of such proceedings, or at the time the Premises is otherwise acquired, the balance then remaining in the funds accumulated under this paragraph as a cr edit toward any delinquent or accrued taxes and then in such priority as Lender elects to the other Indebtedness.

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(b)

Any funds held under this paragraph shall not constitute any deposit or account of the Borrower or moneys to which the Borrower is entitled upon demand, or upon the mere passage of time.  Lender shall not be required to segregate such deposits and may hold such deposits in its general account or any other account and may commingle such deposits with any other moneys of Lender or moneys which Lender is holding on behalf of any other person or entity.

6.

In the event of any damage to or destruction of the Premises, or any part thereof:

(a)

Borrower will immediately notify Lender thereof in the manner provided in this Deed of Trust for the giving of notices.  Lender shall have the right (which may be waived by Lender in writing) to settle and adjust any claim under such insurance policies required to be maintained by Borrower.  In all circumstances, the proceeds thereof shall be paid to Lender and Lender is authorized to collect and to give receipts therefor.  Borrower agrees and acknowledges that such proceeds shall be held by Lender without any allowance of interest and that in any bankruptcy proceeding of Borrower, all such proceeds shall be deemed to be "Cash Collateral" as that term is defined in Section 363 of the Bankruptcy Code.  Provided that no Event of Default exists, Borrower shall have the right to participate in any settlement or adjustment; provided, however, that any settlement or adjustment where the aggregate amount of suc h proceeds equals or exceeds $500,000 shall be subject to the written approval of Lender, not to be unreasonably withheld.

(b)

Such proceeds, after deducting therefrom any reasonable expenses incurred by Lender in the collection thereof (including but not limited to reasonable attorneys' fees and costs), shall be applied by Lender to pay the Indebtedness secured hereby including, but not limited to the Make Whole Premium, whether or not then due and payable, provided, however, that if no Event of Default exists at the time of such application or the application occurs during the Open Period, no Make Whole Premium shall be due.

Notwithstanding anything hereinabove to the contrary,

(i)

in the event the casualty occurs more than three (3) months prior to the Maturity Date and no Event of Default exists, Lender shall apply such proceeds as follows outlined below; provided, further, that Lender's rights in this subparagraph are subject to Borrower's rights to use such proceeds for rebuilding and restoring the buildings and improvements as may be required or permitted by law in effect at the time of the loss:

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(A)

If the aggregate amount of such proceeds is less than $500,000, Lender shall pay such proceeds directly to Borrower, to be held in trust for Lender and applied to the cost of rebuilding and restoring the Premises.

(B)

If the aggregate amount of such proceeds equals or exceeds $500,000 Lender shall disburse such amounts of the proceeds as Lender reasonably deems necessary for the repair or replacement of the Premises, subject to the conditions set forth in 6(c) below.

(ii)

in the event (x) an Event of Default exists, or (y) the casualty occurs during the last three (3) months prior to the Maturity Date and Lender determines that the repair and restoration of such casualty cannot be completed prior to the Maturity Date, or (z) the conditions set forth in 6(c) are not met, then Lender, in its sole and absolute discretion may either:

(A)

declare the entire Indebtedness to be immediately due and payable, provided, however, that if no Event of Default exists or the loan term is in the Open Period, no Make Whole Premium shall be due.  All proceeds shall be applied toward payment of the Indebtedness in such priority as Lender elects; or

(B)

disburse such proceeds as Lender reasonably deems necessary for the repair or replacement of the Premises subject to those conditions set forth in 6(c) which Lender in its sole and absolute discretion may require.

(c)

(i)

In the event that Borrower is to be reimbursed out of the insurance proceeds or out of any award or payment received with respect to a Taking, Lender shall from time to time make available such proceeds, subject to the following conditions: (a) there continues to exist no Event of Default; (b) the delivery to Lender of satisfactory evidence of the estimated cost of completion of such repair and restoration work and any architect's certificates, waivers of lien, contractor's sworn statements, and other evidence of cost and of payment and of the continued priority of the lien hereof over any potential liens of mechanics and materialmen (including, without limitation, title policy endorsements) as Lender may reasonably require and approve; (c) the time required to complete the repair and restoration work and for the income from the Premises to return to the level it was prior to the loss will not exceed the

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coverage period of the rental value insurance required hereunder; (d) the annual net operating income shall equal or exceed 1.20 times the annual debt service on the Note.  Only net operating income from approved executed Leases in effect on the Premises, with no uncured defaults, shall be used in Lender's determination of the annual net operating income; (e) Lender approves the plans and specifications of such work before such work is commenced if the estimated cost of rebuilding and restoration exceeds 25% of the Indebtedness or involves any structural changes or modifications, which approval shall not be unreasonably withheld; (f) if the amount of any insurance proceeds, award or other payment is insufficient to cover the cost of restoring and rebuilding the Premises, Borrower shall pay such cost in excess of such proceeds, award or other payment before being entitled to reimbursement out of such funds; (g) Borrower pays to L ender a non-refundable processing fee equal to the greater of $5,000.00 or .25% of the amount of such proceeds within sixty (60) days of the occurrence of any such damage or destruction and before Lender disburses any proceeds; and (h) such other conditions to such disbursements, in Lender's reasonable discretion, as would be customarily required by a construction lender doing business in the area where the Premises is located or which are otherwise required by any rating agency rating a securitization transaction with respect to the Loan.

(ii)

No payment made by Lender prior to the final completion of the repair or restoration work shall, together with all payments theretofore made, exceed 90% of the cost of such work performed to the time of payment, and at all times the undisbursed balance of said proceeds shall be at least sufficient to pay for the cost of completion of such work free and clear of all liens.  Any proceeds remaining after payment of the cost of rebuilding and restoration shall be paid to Borrower so long as no Event of Default has occurred and is continuing.

(iii)

Repair and restoration of the Premises shall be commenced promptly after the occurrence of the loss and shall be prosecuted to completion diligently, and the Premises shall be so restored and rebuilt to substantially the same character and quality as prior to such damage and destruction and shall comply with all Legal Requirements.

(d)

Should such damage or destruction occur after foreclosure or sale proceedings have been instituted, the proceeds of any such insurance policy or policies, if not applied in rebuilding or restoration of the

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Improvements, shall be used to pay (i) the Indebtedness then due and owing in the event of a non-judicial sale in such priority as Lender elects, or (ii) the amount due in accordance with any decree of foreclosure or deficiency judgment that may be entered in connection with such proceedings, and the balance, if any, shall be paid to the owner of the equity of redemption if it shall then be entitled to the same, or otherwise as any court having jurisdiction may direct.

7.

In the event of the commencement of a Taking affecting the Premises:

(a)

Borrower shall notify Lender thereof in the manner provided in this Deed of Trust for the giving of notices.  Lender may participate in such proceeding, and Borrower shall deliver to Lender all documents requested by it to permit such participation.

(b)

Borrower shall cause the proceeds of any award or other payment made relating to a Taking, to be paid directly to Lender.  Lender, in its sole and absolute discretion: (i) may apply all such proceeds to pay the Indebtedness in such priority as Lender elects, provided however, that if no Event of Default exists at the time of such application no Make Whole Premium shall be due; or (ii) subject to and in accordance with the provisions set forth in paragraph 6(c) above, may disburse such amounts of the proceeds as Lender reasonably deems necessary for the repair or replacement of the Premises.

Notwithstanding anything herein above to the contrary, provided no Event of Default exists, Lender agrees to disburse the proceeds received from any Inconsequential Taking, as hereinafter defined, to Borrower for the repair and/or replacement of the Premises.  An Inconsequential Taking shall be a Taking which (i) results in less than $100,000 in proceeds; (ii) does not, in Lender's determination, materially or adversely affect the Improvements, parking, access, ingress, egress or use of the Premises; and (iii) does not trigger any rights or options of tenants under the Leases.   

8.

If by the laws of the United States of America or of any state or governmental subdivision having jurisdiction over Borrower or of the Premises or of the Loan evidenced by the Loan Documents or any amendments or modifications thereof, any tax or fee is due or becomes due or is imposed upon Lender in respect of the issuance of the Note hereby secured or the making, recording and registration of this Deed of Trust or otherwise in connection with the Loan Documents, the Environmental Indemnity or the Loan, except for Lender's income or franchise tax, Borrower covenants and agrees to pay such tax or fee in the manner required by such law, and to hold harmless and indemnify Trustee and Lender, their

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successors and assigns, against any liability incurred by reason of the imposition of any such tax or fee.  

9.

(a)

Upon the occurrence of any Event of Default, Lender may, but need not, make any payment or perform any act herein required of Borrower, in any form and manner deemed expedient and may, but need not, make full or partial payments of principal or interest on prior encumbrances, if any, and purchase, discharge, compromise or settle any tax lien or other prior lien or title or claim thereof, or redeem from any tax sale or forfeiture affecting said Premises, or contest any tax or assessment.  All moneys paid for any of the purposes herein authorized and all reasonable expenses paid or incurred in connection therewith, including but not limited to, reasonable attorneys' fees and costs and reasonable attorneys' fees and costs on appeal, and any other money advanced by Lender to protect the Premises and the lien hereof, shall be so much additional Indebtedness secured hereby and shall become immediately due and payable without notice an d with interest thereon at the Default Rate from the date of expenditure or advance until paid.  

(b)

In making any payment hereby authorized relating to taxes or assessments or for the purchase, discharge, compromise or settlement of any prior lien, Lender may make such payment according to any bill, statement or estimate secured from the appropriate public office without inquiry into the accuracy thereof or into the validity of any tax, assessment, sale, forfeiture, tax lien or title or claim thereof or without inquiry as to the validity or amount of any claim for lien which may be asserted.  

10.

If one or more of the following events (herein called an "Event of Default" or "Events of Default" as the context so requires) shall have occurred:  

(a)

failure to pay when due any principal, interest, Make Whole Premium or other Indebtedness, utilities, taxes or assessments or insurance premiums required pursuant to the Loan Documents or the Environmental Indemnity, and such failure shall have continued for 5 days; or

(b)

Borrower, Interest Owner or any guarantor voluntarily brings or acquiesces to any of the following:  (A) any action for dissolution, act of dissolution or dissolution or the like of Borrower, Interest Owner or any guarantor under the Federal Bankruptcy Code as now or hereafter constituted; (B) the filing of a petition or answer proposing the adjudication of Borrower, Interest Owner or any guarantor as a bankrupt or its reorganization or arrangement, or any composition, readjustment, liquidation, dissolution or similar relief with respect to it pursuant to any present or future federal or state bankruptcy or similar law; or (C) the appointment by order of a court

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of competent jurisdiction of a receiver, trustee or liquidator of the Premises or any part thereof or of Borrower, Interest Owner or any guarantor or of substantially all of the assets of Borrower, Interest Owner or any guarantor; or

(c)

one or more of the items set forth in paragraph 10(b) above occur which were either not (i) voluntarily brought by Borrower, Interest Owner or any guarantor or (ii) acquiesced in by Borrower, Interest Owner or any guarantor, and which are not discharged or dismissed within 90 days after the action, filing or appointment, as the case may be; or

With respect to the matters in (b) and (c) above for an Interest Owner only, no Event of Default shall occur until an interested party or Interest Owner asserts a claim or right against Borrower or the Premises which delays or otherwise affects Lender's rights, remedies, or interests granted under the Loan Documents (whether or not such assertion is successful).

(d)

with respect to the matters not described in the other subparagraphs of this paragraph 10, failure to duly observe or perform any covenant, condition or agreement of the Borrower or any guarantor contained in this Deed of Trust, the Guaranty, the Note or the Assignment of Leases from Borrower to Lender or in any other instrument or agreement which evidences or secures the Loan (the "Loan Documents"), but excluding the Environmental Indemnity or in the Environmental Indemnity, and such failure shall have continued for 30 days after Notice specifying such failure is given by Lender to Borrower; or

If any failure to observe or perform under (d) above shall be of such nature that it cannot be cured or remedied within 30 days, Borrower shall be entitled to a reasonable period of time to cure or remedy such failure (not to exceed 90 days following the giving of Notice), provided Borrower commences the cure or remedy thereof within the 30 day period following the giving of Notice and thereafter proceeds with diligence, as determined by Lender, to complete such cure or remedy.  

With respect to the matters in (d), no Event of Default shall occur if the failure to observe or perform will not have a Material Adverse Effect as such term is defined below.

"Material Adverse Effect" means a material adverse effect upon (i) the business or the financial position or results of operation of Borrower, (ii) the ability of Borrower to perform, or of Lender to enforce, any of the Loan Documents or Environmental Indemnity or (iii) the value of (x) the Collateral taken as a whole or (y) the Premises.

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(e)

the failure of Borrower to duly observe or perform any of the covenants, conditions and agreements of the Borrower contained in paragraph 2(f) of this Deed of Trust and to cure such failure within ten (10) days following Borrower’s receipt of Notice of such failure; provided, however, that Borrower shall only be granted said 10 day cure period if the failure to observe or perform is a curable event and the granting of said cure period will not have a Material Adverse Effect; or

(f)

any representation when made by or on behalf of Borrower, Interest Owner or any guarantor regarding the Premises, the making or delivery of any of the Loan Documents or the Environmental Indemnity or in any material written information provided by or on behalf of Borrower, Interest Owner or any guarantor in connection with the Loan shall prove to be untrue or inaccurate in any material respect; or

(g)

the failure of Borrower to give Notice to Lender within 90 days after the death of any individual who is personally liable for any obligation under the Loan Documents or the Environmental Indemnity, as Borrower, indemnitor or guarantor, whether or not such individual had executed the Note or this Deed of Trust; or

(h)

subject to the provisions of paragraph 2(f), the failure of Borrower to provide Lender with an assumption agreement in form and substance and executed by a person(s) or entity(ies) acceptable to Lender in its sole discretion to assume the obligations of any deceased individual who is personally liable for any obligation under the Loan Documents or the Environmental Indemnity, as Borrower, indemnitor or guarantor, whether or not such individual had executed the Note or this Deed of Trust, and such failure shall have continued for 90 days after the death of such individual;

(i)

all or any portion of the Premises is operated as or converted to a cooperative or condominium form of ownership; or

then, in each and every such case, the whole of said principal sum hereby secured shall, at the option of the Lender and without further notice to Borrower, become immediately due and payable together with accrued interest thereon, a Make Whole Premium calculated in accordance with the provisions of the Loan Documents and all other Indebtedness, and whether or not Lender has exercised said option, interest shall accrue on the entire principal balance and any interest or Make Whole Premium or other Indebtedness then due, at the Default Rate until fully paid or if

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Lender has not exercised said option, for the duration of any Event of Default.  

11.

Borrower agrees that if Lender accelerates the whole or any part of the principal sum hereby secured after the occurrence of an Event of Default but outside of the Open Periods, that Borrower shall pay as yield maintenance protection and not as a penalty, a "Make Whole Premium", as defined in the Note.

12.

(a)

Upon the occurrence of any Event of Default, in addition to any other rights or remedies provided in the Loan Documents, at law, in equity or otherwise, Lender shall have the right to cause the Premises or any part thereof to be sold in order to accomplish the object of these trusts and upon demand by Lender, Trustee, without demand on Borrower, shall sell the Premises or such part thereof as Trustee in its sole discretion may deem necessary to accomplish the objects of these trusts having first given notice of the time and place of such sale as required by law for the sale of real property upon execution.

(b)

Trustee may postpone such sale from time to time by giving notice of such postponement in the same manner in which any original notice of sale was given or by an announcement or proclamation made to the persons assembled at the time and place previously appointed and noticed for such sale or postponed sale, and on the date of such sale or the date to which such sale may have been postponed Trustee may sell the Premises to the highest bidder.  Lender or its agents may bid and purchase at such sale.  Trustee in conducting said sale may act either in person or through the agency of an auctioneer and may establish as one of the conditions of such sale that all bids and payments for said Premises be made in cash.

13.

Upon such sale, Trustee shall make, execute, and after due payment is made, deliver to the purchaser or purchasers a deed or deeds for the Premises or part thereof sold and shall apply the proceeds of the sale, at the election of Lender first, to all of the expenses of such sale including the reasonable expenses of this trust or the Trustee and the fees and costs of any attorneys for this trust, environmental audits, the Trustee or Lender, all of which shall accrue and become due from and after any Event of Default, together with any sums which Trustee or Lender shall have paid for procuring any abstract, certificate or report of title to the Premises and, second, to principal, interest and any other Indebtedness and all other sums or amounts due under the Note or agreed or provided to be paid by Borrower herein or in any other Loan Documents, all in such order as Lender may determine.  The remainder of such proceeds, if any, sha ll be paid to Borrower or Borrower's successors or assigns, as their rights may appear.  

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14.

In the event of such a sale of the Premises or any part thereof and the execution of a deed or deeds therefor under these trusts, any recital therein of the occurrence of an Event of Default or of the giving or recording of any notice or demand by Trustee or Lender regarding such sale shall be conclusive proof thereof, and the receipt of the purchase money recited therein shall fully discharge the purchaser from any obligation for the proper application of the proceeds of sale in accordance with these trusts.

15.

Following the occurrence of an Event of Default, unless the same has been specifically waived in writing, Borrower shall forthwith upon demand of Trustee or Lender surrender to Lender possession of the Premises, and Lender shall be entitled to take actual possession of the Premises or any part thereof personally or by its agents or attorneys, and Lender in its discretion may, with or without force and with or without process of law, enter upon and take and maintain possession of all or any part of the Premises together with all documents, books, records, papers and accounts of the Borrower or the then owner of the Premises relating thereto, and may exclude Borrower, its agents or assigns wholly therefrom, and may as attorney-in-fact or agent of the Borrower, or in its own name as Lender and under the powers herein granted:

(a)

hold, operate, maintain, repair, rebuild, replace, alter, improve, manage or control the Premises as it deems judicious, insure and reinsure the same and any risks related to Lender's possession, operation and management thereof and receive all Rents, either personally or by its agents, and with full power to use such measures, legal or equitable, as in its discretion it deems proper or necessary to enforce the payment or security of the Rents, including actions for the recovery of Rent, actions in forcible detainer and actions in distress for Rents, hereby granting full power and authority to exercise each and every of the rights, privileges and powers herein granted at any and all times hereafter, without notice to Borrower; and

(b)

conduct leasing activity pursuant to the provisions of the Assignment of Leases.

Neither Trustee nor Lender shall be obligated to perform or discharge, nor does either hereby undertake to perform or discharge, any obligation, duty or liability under any Lease.  Except to the extent that the same is caused solely by Lender's gross negligence or willful misconduct, should Trustee or Lender incur any liability, loss or damage under any Leases, or under or by reason of the Assignment of Leases, or in the defense of any claims or demands whatsoever which may be asserted against Lender or Trustee by reason of any alleged obligations or undertakings on its part to perform or discharge any of the terms, covenants or agreements in any Lease, the amount thereof, including costs,

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expenses and reasonable attorneys' fees and costs, including reasonable attorneys' fees and costs on appeal, shall be added to the Indebtedness and secured hereby.

16.

Upon the occurrence of an Event of Default, Trustee and Lender in the exercise of the rights and powers conferred upon them shall have the full power to use and apply the Rents, less costs and expenses of collection to the payment of or on account of the items listed in (a) - (c) below, at the election of Lender and in such order as Lender may determine as follows:

(a)

to the payment of (i) the expenses of operating and maintaining the Premises, including, but not limited to the cost of management, leasing (which shall include reasonable compensation to Trustee, Lender and their respective agent or agents if management and/or leasing is delegated to an agent or agents), repairing, rebuilding, replacing, altering and improving the Premises, (ii) premiums on insurance as hereinabove authorized, (iii) taxes and special assessments now due or which may hereafter become due on the Premises, and (iv) expenses of placing the Premises in such condition as will, in the sole judgment of Lender, make it readily rentable;

(b)

to the payment of any principal, interest or any other Indebtedness secured hereby or any deficiency which may result from any foreclosure sale;

(c)

to the payment of established claims for damages, if any, reasonable attorneys' fees and costs and reasonable attorneys' fees and costs on appeal.

The manner of the application of Rents, the reasonableness of the costs and charges to which such Rents are applied and the item or items which shall be credited thereby shall be within the sole and unlimited discretion of Lender.  To the extent that the costs and expenses in (a) and (c) above exceed the amounts collected, the excess shall be added to the Indebtedness and secured hereby.

17.

Upon the occurrence of any Event of Default, unless the same has been specifically waived in writing, Lender may apply to any court having jurisdiction for the appointment of a receiver of the Premises.  Such appointment may be made either before or after sale, without notice, without regard to the solvency or insolvency of Borrower at the time of application for such receiver and without regard to the then value of the Premises or the adequacy of Lender's security.  Lender may be appointed as such receiver.  The receiver shall have power to collect the Rents during the pendency of any foreclosure proceedings and, in case of a sale, during the full statutory period of redemption, if any, as well as during any further times when Borrower, except for the intervention of such receiver, would be entitled to collect such Rents.  In addition, the receiver shall have all other powers which shall be necessary or are usual in such cases for the protection, possession, control, management and operation of the Premises during

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the whole of said period.  The court from time to time may authorize the receiver to apply the net income in its possession at Lender's election and in such order as Lender may determine in payment in full or in part of those items listed in paragraph 16.

18.

(a)

Borrower agrees that all reasonable costs, charges and expenses, including but not limited to, reasonable attorneys' fees and costs, incurred or expended by Trustee or Lender arising out of or in connection with any action, proceeding or hearing, legal, equitable or quasi-legal, including the preparation therefor and any appeal therefrom, in any way affecting or pertaining to the Loan Documents, the Environmental Indemnity, or the Premises, shall be promptly paid by Borrower.  All such sums not promptly paid by Borrower shall bear interest at the Default Rate from the date of such advance and shall be due and payable on demand and, except for sums relating to the Environmental Indemnity, shall be added to the Indebtedness secured hereby.

(b)

Borrower hereby agrees that upon the occurrence of an Event of Default and the acceleration of the principal sum secured hereby pursuant to this Deed of Trust, to the full extent that such rights can be lawfully waived, Borrower hereby waives and agrees not to insist upon, plead, or in any manner take advantage of, any notice of acceleration, any stay, extension, exemption, homestead, marshaling or moratorium law or any law providing for the valuation or appraisement of all or any part of the Premises prior to any sale or sales thereof under any provision of this Deed of Trust or before or after any decree, judgment or order of any court or confirmation thereof, or claim or exercise any right to redeem all or any part of the Premises so sold and hereby expressly waives to the full extent permitted by applicable law on behalf of itself and each and every person or entity acquiring any right, title or interest in or to all or any part of the Premises, all benefit and advantage of any such laws which would otherwise be available to Borrower or any such person or entity, and agrees that neither Borrower nor any such person or entity will invoke or utilize any such law to otherwise hinder, delay or impede the exercise of any remedy granted or delegated to Lender herein but will permit the exercise of such remedy as though any such laws had not been enacted.  Borrower hereby further expressly waives to the full extent permitted by applicable law on behalf of itself and each and every person or entity acquiring any right, title or interest in or to all or any part of the Premises any and all rights of redemption from any sale or any order or decree of foreclosure obtained pursuant to provisions of this Deed of Trust.

19.

In accordance with and subject to the terms and conditions of the Assignment of Leases, Borrower hereby assigns to Lender directly and absolutely, and not merely

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collaterally, the interest of Borrower as lessor under the Leases of the Premises, and the Rents payable under any Lease and/or with respect to the use of the Premises, or portion thereof, including any oil, gas or mineral lease, or any installments of money payable pursuant to any agreement or any sale of the Premises or any part thereof, subject only to a license, if any, granted by Lender to Borrower with respect thereto prior to the occurrence of an Event of Default.  Borrower has executed and delivered the Assignment of Leases which grants to Lender specific rights and remedies in respect of said Leases and governs the collection of Rents thereunder and from the use of the Premises, and such rights and remedies so granted shall be cumulative of those granted herein.  

The collection of such Rents and the application thereof as aforesaid shall not cure or waive any Event of Default or notice of default hereunder or invalidate any act done pursuant to such notice, except to the extent any such Event of Default is fully cured.  Failure or discontinuance of Lender at any time, or from time to time, to collect any such moneys shall not impair in any manner the subsequent enforcement by Lender of the right, power and authority herein conferred on Lender.  Nothing contained herein, including the exercise of any right, power or authority herein granted to Lender, shall be, or be construed to be, an affirmation by Lender of any tenancy, Lease or option, or right to possession otherwise, or an assumption of liability under, or the subordination of the lien or charge of this Deed of Trust to any such tenancy, Lease or option or right to possession otherwise.  Borrower hereby agrees that, in the event Lender exercises its rights as provided for in this paragraph or in the Assignment of Leases, Borrower waives any right to compensation for the use of Borrower's furniture, furnishings or equipment in the Premises for the period such assignment of rents or receivership is in effect, it being understood that the Rents derived from the use of any such items shall be applied to Borrower's obligations hereunder as above provided.  

20.

All rights and remedies granted to Trustee or Lender in the Loan Documents shall be in addition to and not in limitation of any rights and remedies to which it is entitled in equity, at law or by statute, and the invalidity of any right or remedy herein provided by reason of its conflict with applicable law or statute shall not affect any other valid right or remedy afforded to Trustee or Lender.  No waiver of any default or Event of Default under any of the Loan Documents shall at any time thereafter be held to be a waiver of any rights of the Trustee or Lender hereunder, nor shall any waiver of a prior Event of Default or default operate to waive any subsequent Event of Default or default.  All remedies provided for in the Loan Documents are cumulative and may, at the election of Lender, be exercised alternatively, successively or concurrently.  No act of Trustee or Lender shall be construed as an election to proceed under any one provision herein to the exclusion of any other provision or to proceed against one portion of the Premises to the exclusion of any other portion.  Time is of the essence under this Deed of Trust and the Loan Documents.

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21.

By accepting payment of any sum secured hereby after its due date, Lender does not waive its right either to require prompt payment when due of all other sums or installments so secured or to declare a default for failure to pay such other sums or installments.

22.

The usury provisions of paragraph 6 of the Note and the liability provisions of paragraph 9 of the Note are fully incorporated herein by reference as if the same were specifically stated here.

23.

In the event one or more provisions of the Loan Documents shall be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision hereof, and the Loan Documents shall be construed as if any such provision had never been contained herein.  

24.

If the payment of the Indebtedness secured hereby or of any part thereof shall be extended or varied, or if any part of the security be released, all persons now or at any time hereafter liable therefor, or interested in said Premises, shall be held to assent to such extension, variation or release, and their liability and the lien and all provisions hereof shall continue in full force, the right of recourse against all such persons being expressly reserved by Lender notwithstanding such variation or release.  

25.

Upon payment in full of the principal sum, interest and other Indebtedness secured by the Loan Documents, these presents shall be null and void, and Trustee shall release this Deed of Trust and the lien hereof by proper instrument executed in recordable form.  

26.

(a)

Borrower hereby grants to Lender and its respective agents, attorneys, employees, consultants, contractors and assigns an irrevocable license and authorization to enter upon and inspect the Premises and all facilities located thereon at reasonable times.

(b)

In connection with any sale or conveyance of this Deed of Trust, Borrower grants to Lender and its respective agents, attorneys, employees, consultants, contractors and assigns an irrevocable license and authorization to conduct, at Lender's expense, a Phase I environmental audit of the Premises.

(c)

In the event there has been an Event of Default or in the event Lender has formed a reasonable belief, based on its inspection of the Premises or other factors known to it, that Hazardous Materials may be present on the Premises, then Borrower grants to Lender and its respective agents,

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attorneys, employees, consultants, contractors and assigns an irrevocable license and authorization to conduct environmental tests of the Premises, including without limitation, a Phase I environmental audit, subsurface testing, soil and ground water testing, and other tests which may physically invade the Premises or facilities (the "Tests").  The scope of the Tests shall be such as Lender, in its sole but reasonable discretion, determines is necessary to (i) investigate the condition of the Premises, (ii) protect the security interests created under this Deed of Trust, or (iii) determine compliance with Environmental Laws, the provisions of the Loan Documents and the Environmental Indemnity and other matters relating thereto.  Borrower shall pay the reasonable costs of the Tests and upon Borrower’s request, Lender will make available to Borrower the result of the Tests.

(d)

Provided no Event of Default has occurred, Lender will provide Borrower with reasonable notice of Lender's intent to enter, inspect and conduct the Tests provided for in this paragraph.  In addition, Lender shall conduct such inspections and Tests during normal business hours and use reasonable efforts to minimize disruption of lessees' business operations.

The foregoing licenses and authorizations are intended to be a means of protection of Lender's security interest in the Premises and not as participation in the management of the Premises.

27.

Within 15 days after any written request by any party to this Deed of Trust, the requested party shall certify, by a written statement duly acknowledged, the amount of principal, interest and other Indebtedness then owing on the Note, the terms of payment, Maturity Date and the date to which interest has been paid.  Borrower shall further certify whether any defaults, offsets or defenses exist against the Indebtedness secured hereby.  

28.

(a)

Borrower shall furnish to Lender within 120 days after the end of each fiscal year of Borrower, a statement of income and expenses for Borrower’s operation of the Premises for that fiscal year, a statement of changes in financial position of Borrower relating to the Premises for that fiscal year and, when requested by Lender, a balance sheet showing all assets and liabilities of Borrower relating to the Premises as of the end of that fiscal year;

(b)

Borrower shall furnish to Lender within 120 days after the end of each fiscal year of Borrower, and at any other time upon Lender’s request, a rent schedule for the Premises showing the name of each tenant, and for each tenant, the space occupied, the lease expiration date, the rent payable

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for the current month, the date through which rent has been paid, and any related information requested by Lender;

(c)

Borrower shall furnish to Lender within 120 days after the end of each fiscal year of Borrower, and at any other time upon Lender’s request, an accounting of all security deposits held pursuant to all Leases, including the name of the institution (if any) and the names and identification numbers of the accounts (if any) in which such security deposits are held and the name of the person to contact at such financial institution, along with any authority or release necessary for Lender to access information regarding such accounts;

(d)

upon Lender’s request, a balance sheet, a statement of income and expenses for Borrower, a statement of changes in financial position of Borrower for Borrower’s most recent fiscal year, an aged account receivables report and an annual budget; and

(e)

if required by Lender, a statement of income and expense for the Premises for the prior month or quarter.

(f)

Each of the statements, schedules and reports required by Section 28 shall be certified to be complete and accurate by an individual having authority to bind Borrower, and shall be in such form and contain such detail as Lender may reasonably required.  If an Event of Default has occurred and is continuing, Lender may require that the financial statements required by Sections 28(a), 28(b) and 28(c) be audited, but may not require that any other financial statements required by Section 28 be audited.  Certification of a statement by the chief financial officer of the entity that is the subject of the statement or, in the case of a partnership, the chief financial officer of the general partner, will be acceptable to Lender as certification by an individual having authority to bind Borrower.

29.

Each notice, consent, request, report or other communication under this Deed of Trust or any other Loan Document (each a "Notice") which any party hereto may desire or be required to give to the other shall be deemed to be an adequate and sufficient notice if given in writing and service is made by either (i) registered or certified mail, postage prepaid, in which case notice shall be deemed to have been received three (3) business days following deposit to U.S. mail; or (ii) nationally recognized overnight air courier, next day delivery, prepaid, in which case such notice shall be deemed to have been received one (1) business day following delivery to such nationally recognized overnight air courier.  All Notices shall be addressed to Borrower at its address given on the first page hereof, or to Lender at c/o Principal Real Estate Investors, LLC, 801 Grand Avenue, Des Moines, Iowa 50392-1450, Attn:  Commerc ial Real Estate Servicing, Loan No. 755498, or to

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such other place as any party may by written notice to the other parties hereafter designate as a place for service of notice.  Borrower shall not be permitted to designate more than one place for service of Notice concurrently.

30.

Lender, from time to time, may substitute another Trustee in place of the Trustee named herein, to execute the trusts hereby created; and upon such appointment, and without conveyance to the successor trustee, the successor trustee shall be vested with all the title, interest, powers, duties and trusts in the Premises hereby vested in or conferred upon Trustee herein named.  Each such appointment and substitution shall be made by written instrument executed by the Lender containing reference to this Deed of Trust sufficient to identify it, which instrument, when recorded in the office of the County Recorder of the county or counties in which the Premises is situated, shall be conclusive proof of proper appointment of the successor trustee.  The recital or statement, in any instrument executed by Trustee in pursuance of any of said trusts, of the due authorization of any agent of the Trustee executing the same shall for all p urposes be conclusive proof of such authorization.  

31.

Trustee at any time, at Trustee's option, may commence and maintain suit in any court of competent jurisdiction and obtain the aid and direction of said court in the execution by it of the trusts or any of them, herein expressed or contained, and, in such suit, may obtain the orders or decrees, interlocutory or final of said court directing the execution of said trusts, and confirming and approving Trustee's acts, or any of them, or any sales or conveyances made by Trustee, and adjudging the validity thereof, and directing that the purchasers of the property sold and conveyed be let into immediate possession thereof, and providing for orders of court or other process requiring the Sheriff of the county in which said property is situated to place and maintain said purchasers in quiet and peaceable possession of the property so purchased by them, and the whole thereof.  

32.

Borrower has had the opportunity to fully negotiate the terms hereof and modify the draftsmanship of the Loan Documents and the Environmental Indemnity.  Therefore, the terms of the Loan Documents and the Environmental Indemnity shall be construed and interpreted without any presumption, inference, or rule requiring construction or interpretation of any provision of the Loan Documents and the Environmental Indemnity against the interest of the party causing the Loan Documents and the Environmental Indemnity or any portion of it to be drafted.  Borrower is entering into the Loan Documents and the Environmental Indemnity freely and voluntarily without any duress, economic or otherwise.

33.

Borrower, forthwith upon request, at any and all times hereafter, at the expense of Borrower, will cause to be made, executed, acknowledged and delivered to Trustee, any and every deed or assurance in law which Trustee or counsel of

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Trustee shall reasonably advise or require for the more sure, effectual and satisfactory granting and confirming of said Premises unto Trustee.  

34.

Trustee shall not be liable or responsible for its acts or omissions hereunder, except for Trustee's own gross negligence or willful default, or be liable or responsible for any acts or omissions of any agent, attorneys or employee by him employed hereunder, if selected with reasonable care.  

35.

Trustee accepts this trust when this Deed of Trust executed and acknowledged is made a public record as provided by law.  Trustee is not obligated to notify any party hereto of pending sale under any other deed of trust or of any action or proceeding in which Borrower, Lender, or Trustee shall be a party unless brought by Trustee.  

36.

This Deed of Trust and all provisions hereof shall inure to the benefit of the heirs, successors and assigns of Lender and shall bind the heirs and permitted successors and assigns of Borrower.  

37.

This Deed of Trust shall be governed by, and construed in accordance with, the laws of the state of California, without regard to its conflicts of law principles.

38.

As used herein, the term "Default Rate" means a rate equal to the lesser of (i) four percent (4%) per annum above the then applicable interest rate payable under the Note or (ii) the maximum rate allowed by applicable law.

39.

BORROWER AND LENDER EACH KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE, TO THE EXTENT PERMITTED BY LAW, TRIAL BY JURY IN ANY ACTIONS BROUGHT BY BORROWER, TRUSTEE OR LENDER IN CONNECTION WITH THIS DEED OF TRUST, ANY OF THE LOAN DOCUMENTS, THE INDEBTEDNESS SECURED HEREBY, OR ANY OTHER STATEMENTS OR ACTIONS OF LENDER.

40.

This Deed of Trust and the Indebtedness secured hereby is for the sole purpose of conducting or acquiring a lawful business, professional or commercial activity or for the acquisition or management of real or personal property as a commercial investment, and all proceeds of such Indebtedness shall be used for said business or commercial investment purpose.  Such proceeds will not be used for the purchase of any security within the meaning of the Securities Exchange Act of 1934, as amended, or any regulation issued pursuant thereto, including without limitation, Regulations U, T and X of the Board of Governors of the Federal Reserve System.  This is not a purchase money deed of trust where a seller is providing financing to a buyer for the payment of all or any portion of the purchase price, and the Premises secured hereby is not a residence or homestead or used for mining, grazing, agricultural, timber or farming purposes.

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41.

Unless Lender shall otherwise direct in writing, Borrower shall appear in and defend all actions or proceedings purporting to affect the security hereunder, or any right or power of the Lender.  The Lender shall have the right to appear in such actions or proceedings.  Borrower shall save Lender harmless from all reasonable costs and expenses, including but not limited to, reasonable attorneys' fees and costs, and costs of a title search, continuation of abstract and preparation of survey incurred by reason of any action, suit, proceeding, hearing, motion or application before any court or administrative body in and to which Lender may be or become a party by reason hereof.  Such proceedings shall include but not be limited to condemnation, bankruptcy, probate and administration proceedings, as well as any other action, suit, proceeding, right, motion or application wherein proof of claim is by law required to be filed or in which it becomes necessary to defend or uphold the terms of this Deed of Trust or the Loan Documents or otherwise purporting to affect the security hereof or the rights or powers of Lender.  All money paid or expended by Lender in that regard, together with interest thereon from date of such payment at the applicable interest rate shall be additional Indebtedness secured hereby and shall be immediately due and payable by Borrower without notice.

42.

Upon the occurrence of an Event of Default, unless the same has been specifically waived in writing, all Rents collected or received by Borrower shall be accepted and held for Lender in trust and shall not be commingled with the funds and property of Borrower, but shall be promptly paid over to Lender.

43.

If more than one, all obligations and agreements of Borrower are joint and several.

44.

This Deed of Trust may be executed in counterparts, each of which shall be deemed an original; and such counterparts when taken together shall constitute but one agreement.

45.

Borrower shall pay Lender for every Lender statement furnished at Borrower's request the maximum fee allowed by law pursuant to Section 2943 of the Civil Code of California and all amendments thereto, the provisions of which are incorporated herein by reference and made a part hereof.  Such fee shall be computed as of the time said statement is furnished.

46.

Borrower hereby irrevocably authorizes Lender to apply any and all amounts received by Lender in repayment of amounts due under the Loan Documents first to amounts which are not guaranteed pursuant to the terms of any guaranty and then to amounts which are guaranteed pursuant to the terms of any guaranty.  Borrower hereby waives any and all rights it has or may have under Section 2822 of the California Civil Code which provides that if a guarantor is "liable upon only a portion of an obligation and the principal provides partial satisfaction of the

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obligation, the principal may designate the portion of the obligation that is to be satisfied."

47.

Notwithstanding anything to the contrary set forth herein or in any of the Loan Documents, this Deed of Trust shall not secure the following obligations (the "Unsecured Obligations"):  (i) any obligations evidenced by or arising under the Environmental Indemnity; and (ii) any other obligations in this Deed of Trust or in any of the other Loan Documents to the extent that such other obligations relate specifically to the presence on the Premises of Hazardous Materials and are the same or have the same effect as any of the obligations evidenced by or arising under the Environmental Indemnity (excluding the cost of any Tests incurred by Lender hereunder).  Any breach or default with respect to the Unsecured Obligations after the expiration of any applicable cure periods shall constitute an Event of Default hereunder, notwithstanding the fact that such Unsecured Obligations are not secured by this Deed of Trust.

48.

Borrower desires and intends that this Deed of Trust also constitute a fixture filing between Borrower as debtor and Lender as secured party, as defined in the Uniform Commercial Code.  To this end, Borrower acknowledges that (i) this Deed of Trust covers goods which are or are to become fixtures on the Land; (ii) this financing statement is to be recorded; (iii) Borrower is the record owner of such property; and (iv) products of collateral are also covered.  No financing statement in favor of any secured party other than Lender covering the personal property described herein or any portion thereof is on file in any public office.

(Signatures on next page)

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IN WITNESS WHEREOF, Borrower has caused this Deed of Trust to be duly executed and delivered as of the date first above written.   

VMS NATIONAL PROPERTIES, an Illinois general partnership

By:

VMS NATIONAL RESIDENTIAL PORTFOLIO I, an Illinois limited partnership

By:

MAERIL, INC., a Delaware

                        corporation, its general partner

       By: /s/Patti K. Fielding

       Name:  Patti K. Fielding

                Title:  Executive Vice President  

                           and Treasurer

By:

VMS NATIONAL RESIDENTIAL PORTFOLIO II, an Illinois limited partnership

By:

MAERIL, INC., a Delaware

                        corporation, its general partner

       By: /s/Patti K. Fielding

       Name:  Patti K. Fielding

                Title:  Executive Vice President  

                           and Treasurer

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EX-10

EXHIBIT 10.38

GUARANTY

755498

THIS GUARANTY (as the same may from time to time hereafter be modified, supplemented or amended, the "Guaranty") is made as of January 19, 2007, by AIMCO PROPERTIES, L.P., a Delaware limited partnership, having an office at Stanford Place 3, 4582 South Ulster Street Parkway, Suite 1100, Denver, Colorado 80237 ("Guarantor"), in favor of PRINCIPAL LIFE INSURANCE COMPANY, an Iowa corporation ("Lender").

RECITALS:

Lender has agreed to make a loan (the "Loan") in the original principal sum of Forty-Nine Million and 00/100 Dollars ($49,000,000.00) (the "Loan Amount") to VMS NATIONAL PROPERTIES, an Illinois general partnership ("Borrower"); and

The Loan is evidenced by Borrower's secured promissory notes, one in the original principal sum of $29,000,000.00 made payable to Principal Life Insurance Company and the other in the original principal sum of $20,000,000.00 made payable to Principal Life Insurance Company (as the same may from time to time hereafter be modified, amended, supplemented, extended or consolidated in writing, and any note(s) issued in exchange therefor or replacement thereof, collectively the "Note") and further evidenced and secured by a "Mortgage" (it being agreed that "Mortgage" as hereinafter used shall be construed to mean "mortgage" or "deed of trust" or "trust deed" or "deed to secure debt" as the context so requires) on certain real estate located in San Mateo County, California, together with all existing improvements constructed thereon, said Premises being more p articularly described in said Mortgage, and an Assignment of Leases ("Assignment of Leases"); and

In connection with the Loan, the Borrower has also executed that certain Environmental Indemnity ("Environmental Indemnity") for the benefit of Lender (the Note, Environmental Indemnity, Mortgage and Assignment of Leases and all other instruments or agreements by which the Loan is evidenced or secured are hereinafter collectively referred to as the "Underlying Instruments"); and

It is a condition of Lender's agreement to make the Loan that Guarantor be unconditionally liable for and personally guarantee the payment and performance of certain liabilities and obligations of the Borrower under the Underlying Instruments upon the terms and conditions as are hereinafter set forth and except for such liabilities and obligations described herein, Guarantor shall have no liability in connection with, or responsibility to perform, under or in accordance with the Underlying Instruments; and

WHEREAS, Guarantor is financially interested in Borrower and is materially benefited by the consummation of the Loan and has agreed to unconditionally and personally guarantee the

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payment and performance of certain liabilities and obligations of Borrower under the Underlying Instruments upon the terms and conditions as are hereinafter set forth.

NOW, THEREFORE, in order to induce Lender to make the Loan to Borrower, Guarantor intending to be legally bound, hereby makes the following representations and warranties to the Lender and hereby covenants and agrees with the Lender as follows:

1.

Guarantor absolutely, irrevocably and unconditionally guarantees to the Lender payment and the full, faithful and timely performance of any and all liabilities and obligations of Borrower whether now existing or hereafter incurred under the Environmental Indemnity and paragraph 9 of the Note (all of which payments, liabilities and obligations are hereinafter collectively referred to as the "Guaranteed Obligations").

2.

Guarantor absolutely, irrevocably and unconditionally waives notice of acceptance of this Guaranty and notice of any payment, liability or obligation to which it may apply, and waives presentment, demand of payment, protest, notice of dishonor or nonpayment of such liabilities under this Guaranty or any of the Underlying Instruments creating the Guaranteed Obligations and any suit or taking other action by the Lender against, and any other notice to, any party liable thereon or any property which may be security therefor.

3.

The Lender may at any time and from time to time without the consent of, or notice to, Guarantor, without incurring any responsibility to Guarantor and without impairing or releasing any of the obligations of Guarantor hereunder, upon or without any terms or conditions and in whole or in part:

(a)

renew, alter or change the interest rate, manner, time, place or terms of payment or performance of any of the Guaranteed Obligations, or any liability incurred directly or indirectly in respect thereof, whereupon the guaranty herein made shall apply to the Guaranteed Obligations as so changed, extended, renewed or altered;

(b)

sell, exchange, release, surrender, and in any manner and in any order realize upon or otherwise deal with any property at any time directly and absolutely assigned or pledged or mortgaged to secure the Guaranteed Obligations or any liabilities (including any of those hereunder) incurred directly or indirectly in respect thereof;

(c)

exercise or refrain from exercising any rights against Borrower or any other person (including Guarantor) or otherwise act or refrain from acting with regard to the Underlying Instruments, Guaranteed Obligations or this Guaranty;

(d)

settle or compromise any of the Guaranteed Obligations, any security therefor or any liability (including any of those hereunder) incurred directly or indirectly in respect thereof or hereof, and/or subordinate the payment of all or any part thereof

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to the payment of any liability of Borrower (whether or not then due) to creditors of Borrower other than the Lender and Guarantor;

(e)

apply any sums in whatever manner paid or realized to any liability or liabilities of Borrower to the Lender regardless of what liability or liabilities of Borrower remain unpaid;

(f)

consent to or waive any breach of or any act, omission or default under the Underlying Instruments or otherwise amend, modify or supplement any of such instruments or agreements; and/or

(g)

sell, convey or assign, whether into a securitized transaction or otherwise, all or any part of Lender's interest in this Guaranty and the Underlying Instruments.

4.

(a)

No invalidity, irregularity or unenforceability of all or any part of the Underlying Instruments, the Guaranteed Obligations or this Guaranty, or of any security therefor, shall affect, impair or constitute a defense to this Guaranty.  This Guaranty is a direct and primary obligation of Guarantor, and Guarantor's obligations hereunder are not as a surety.  This is a guaranty of payment and performance, and not merely a guaranty of collection.

(b)

Guarantor acknowledges and agrees that this Guaranty and Guarantor's obligations with respect to payments and performance under the Environmental Indemnity shall remain in full force and effect, notwithstanding the fact that the Note and payments due under the other Underlying Instruments have been paid in full.  The Guarantor’s obligations with respect to payments and performance under paragraph 9 of the Note shall remain in full force and effect until the liabilities and obligations of Borrower under paragraph 9 of the Note have been paid and performed in full.

5.

(a)

Notwithstanding any payment or payments made by Guarantor hereunder, Guarantor will not assert or exercise any right of the Lender or of such Guarantor against Borrower to recover the amount of any payment made by such Guarantor to the Lender by way of subrogation, reimbursement, contribution, indemnity or otherwise arising by contract or operation of law, and Guarantor shall not have any right of recourse to or any claim against assets or property of Borrower, whether or not the obligations of Borrower have been satisfied, all of such rights being herein expressly waived by Guarantor.  The provisions of this paragraph shall survive the termination of this Guaranty, and any satisfaction and discharge of Borrower by virtue of any payment, court order or any applicable law.

(b)

Notwithstanding the provisions of Section 5(a), Guarantor shall have and be entitled to all rights of subrogation otherwise provided by applicable law in

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respect of any payment Guarantor may make or be obligated to make under this Guaranty, and to assert and enforce the same, in each case on and after, but at no time prior to, the date (the "Subrogation Trigger Date") which is 91 days after the date on which all obligations under the Underlying Instruments shall have been paid or performed in full, if and only if the existence of Guarantor's rights under this Section 5(b) would not make Guarantor a creditor (as defined in the Bankruptcy Reform Act of 1978, an amended, 11 U.S.C. Sections 101 et seq., and the regulations adopted and promulgated pursuant thereto) of Borrower in any insolvency bankruptcy, reorganization or similar proceeding commenced on or prior to the Subrogation Trigger Date.

(c)

In the event that Guarantor shall advance or become obligated to pay any sums with respect to any obligation hereby guaranteed or in the event that for any reason whatsoever the Borrower or any subsequent owner of the collateral securing the Loan is now, or shall hereafter become, indebted to Guarantor, Guarantor agrees that the amount of such sums and of such Indebtedness together with all interest thereon, shall at all times be subordinate as to the lien, time of payment and in all other respects, to all sums, including principal, interest and other Indebtedness, at any time owing to the Lender under any of the Underlying Instruments.  Nothing herein contained is intended or shall be construed to give to Guarantor any right to participate in any way in the right, title or interest of the Lender in or to the collateral securing the Loan, notwithstanding any payments made by Guarantor under this Guaranty, all such rights of parti cipation being hereby expressly waived and released.

(d)

Guarantor waives all rights and defenses arising out of an election of remedies by the creditor, even though that election of remedies, such as a nonjudicial foreclosure with respect to security for a guaranteed obligation, has destroyed the guarantor's rights of subrogation and reimbursement against the principal by the operation of Section 580d of the Code of Civil Procedure or otherwise.

(e)

Guarantor waives any rights Guarantor might have pursuant to the terms of Sections of the California Civil Code or Code of Civil Procedure including without limitation the following: (i) Guarantor waives the benefit of any statute of limitations affecting Guarantor's liability hereunder or the enforcement thereof, including, without limitation all rights and benefits, if any, arising under Section 359.5 of the California Code of Civil Procedure; (ii) Guarantor hereby waives, to the fullest extent permitted by law, all rights and benefits under Section 2809 of the California Civil Code purporting to reduce a guarantor's obligations in proportion to the principal obligation, all rights and benefits under Section 580a of the California Code of Civil Procedure purporting to limit the amount of any deficiency judgment which might be recoverable following the occurrence of a trustee's sale under the Deed of Trust, all rights and benefits un der Section 580b

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of the California Code of Civil Procedure stating that no deficiency may be recovered on a real property purchase money obligation and all rights and benefits under Section 580d of the California Code of Civil Procedure stating that no deficiency may be recovered on a note secured by a deed of trust on real property in case such real property is sold under the power of sale contained in such deed of trust, to the extent any such sections have any application hereto or any application to Guarantor; (iii) Guarantor waives all rights and defenses that the Guarantor may have because the Borrower's debt is secured by real property.  This means, among other things:  (1) Lender may collect from the Guarantor without first foreclosing on any real or personal property collateral pledged by the Borrower, (2) if Lender forecloses on any real property collateral pledged by the Borrower:  (A)&n bsp;the amount of debt may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price, (B) Lender may collect from the Guarantor even if Lender, by foreclosing on the real property collateral, has destroyed any right the Guarantor may have to collect from Borrower.  This is an unconditional and irrevocable waiver of any rights and defenses the Guarantor may have because Borrower's debt is secured by real property.  These rights and defenses include, but are not limited to, any rights or defenses based upon Section 580a, 580b, 580d, or 726 of the Code of Civil Procedure; (iv) without limiting the generality of the foregoing or any other provision hereof, the Guarantor waives all rights and benefits which might otherwise be available to the Guarantor under Division Third, Part 4, Title XII of the California Civil Code.

6.

Guarantor agrees that to the extent that Borrower makes a payment or payments to Lender, which payment or payments or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required, for any of the foregoing reasons or for any other reasons, to be repaid or paid over to a custodian, trustee, receiver or any other party under any bankruptcy act, state or federal law, common law or equitable cause, then to the extent of such payment or repayment, the obligation or part thereof intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made.

7.

Guarantor makes the following representations and warranties which shall survive the execution and delivery of this Guaranty:

(a)

Guarantor is and, until the Indebtedness is paid in full, will continue to (i) be a duly organized and validly existing entity in good standing under the laws of the state of its formation, (ii) be duly qualified as a foreign entity in each jurisdiction in which the nature of its business makes such qualification necessary or desirable, (iii) have the requisite power and authority to carry on its business as now being conducted, (iv) have the requisite power to execute, deliver and perform its obligations under this Guaranty, and (v) comply with the provisions of

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all of its organizational documents, and the Legal Requirements of the state of its formation.

(b)

The execution, delivery and performance of this Guaranty (i) are within the applicable powers of Guarantor; (ii) have been authorized by all requisite action; (iii) have received all necessary approvals and consents, corporate, governmental or otherwise; (iv) does not and will not violate, conflict with, result in a breach of or constitute (with notice or lapse of time, or both) a default under any provision of law, any order or judgment of any court or governmental authority, the articles of incorporation, by-laws, partnership, operating or trust agreement, or other governing instrument of Guarantor, or any indenture, agreement or other instrument to which Guarantor is a party or by which Guarantor or any of Guarantor's assets is or may be bound or affected; (v) does not and will not result in the creation or imposition of any lien, charge or encumbrance whatsoever upon any of Guarantor's assets; and (vi) does not and will not requir e any authorization or license from, or any filing with, any governmental authority or other body.

(c)

This Guaranty constitutes the legal, valid and binding obligations of Guarantor, enforceable against Guarantor in accordance with its terms, except as may be limited by (i) bankruptcy, insolvency, reorganization or other similar laws affecting the rights of creditors generally, and (ii) general principles of equity (regardless of whether considered in a proceeding in equity or at law).

8.

Guarantor and Borrower are separate and distinct entities with no identity of interest with respect to any Indebtedness which may become owed or any payments which may be made hereunder.  Borrower is not contractually bound to Guarantor with respect to any payments hereafter made under this Guaranty in any manner which would have the effect of imputing the liability of Guarantor hereunder to Borrower.

9.

Guarantor is related and/or affiliated with Borrower, has personal knowledge of and is familiar with Borrower's business affairs, books and records and has the ability to influence Borrower's financial decisions.  Guarantor represents that Borrower is in sound financial condition as of the date of this Guaranty.

10.

Nothing herein contained shall in any manner affect the lien or priority of the Mortgage, and upon the occurrence of an Event of a Default, the Lender may invoke any remedies it may have under the Underlying Instruments, or this Guaranty, either concurrently or successively and the exercise of any one or more of such remedies shall not be deemed an exhaustion of such remedy or remedies or a waiver of any other remedy or remedies and shall not be deemed an election of remedies.  Guarantor hereby specifically waives any defense to its performance under this Guaranty based upon an election of remedies by Lender, including but not limited to an election to foreclose by nonjudicial sale under any deed of trust or security agreement and pursue any other remedy which destroys, lessens

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or otherwise affects Guarantor's subrogation rights and/or its rights to reimbursement from or to proceed against Borrower or any other person, when resulting from the judicial or nonjudicial foreclosure (under any deed of trust or security agreement) or the selling or otherwise disposing of or collecting or applying any property, real or personal, securing the Note, or otherwise.  The exercise by the Lender of any such remedies shall not release or discharge Guarantor from its obligations hereunder unless and until the full amount of the Indebtedness evidenced by the Note and secured as aforesaid has been fully paid and satisfied, and any such release or discharge shall be subject to the provisions of paragraph 4(b) hereof.

11.

This Guaranty shall remain in full force and effect until all obligations of the Borrower under the Underlying Instruments have been satisfied in full and are no longer subject to disgorgement under any applicable state or federal creditor rights or bankruptcy laws.  No delay on the part of the Lender in exercising any options, powers or rights, or the partial or single exercise thereof, shall constitute a waiver thereof.  No waiver of any rights hereunder, and no modification or amendment of this Guaranty, shall be deemed to be made by either party unless the same shall be in writing, duly signed on behalf of such party, and each such waiver (if any) shall apply only with respect to the specific instance involved and shall in no way impair the rights of such party or the obligations of Guarantor to the Lender in any other respect at any other time.  This Guaranty and the rights and obligations of the Lender and of Guar antor hereunder shall be governed and construed in accordance with the laws of the state of California, without regard to its conflicts of law principles and this Guaranty is binding upon Guarantor, Guarantor's heirs, personal representatives and permitted successors or assigns, and shall inure to the benefit of the Lender and its successors or assigns.

12.

Guarantor acknowledges that copies of the Underlying Instruments have been made available to Guarantor and that Guarantor is familiar with their contents.  Guarantor affirmatively agrees that upon any Permitted Transfer effected in accordance with the provisions of the Underlying Instruments or any transfer by Lender of all or any portion of its interest in the Loan, it shall not be necessary for Guarantor to reaffirm its continuing obligations under this Guaranty, but Guarantor will do so upon request by Lender.

13.

GUARANTOR AND LENDER EACH KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE, TO THE EXTENT PERMITTED BY LAW, TRIAL BY JURY IN ANY ACTIONS BROUGHT BY GUARANTOR OR LENDER IN CONNECTION WITH THIS GUARANTY, ANY OF THE LOAN DOCUMENTS, THE INDEBTEDNESS SECURED HEREBY, OR ANY OTHER STATEMENTS OR ACTIONS OF LENDER.

14.

Each notice, consent, request or other communication under this Guaranty (each a "Notice") which any party hereto may desire or be required to give to the other shall be deemed to be adequate and sufficient notice if given in writing and service is made by

-8-

either (i) registered or certified mail, postage prepaid, in which case such notice shall be deemed to have been received three (3) business days following deposit to U.S. mail; or (ii) nationally recognized overnight air courier, next day delivery, prepaid, in which case such notice shall be deemed to have been received one (1) business day following delivery to such nationally recognized overnight air courier.  All Notices shall be addressed to Guarantor at its address given on the first page hereof, or to Lender at c/o Principal Real Estate Investors, LLC, 801 Grand Avenue, Des Moines, Iowa 50392-1450, Attn: Commercial Real Estate Servicing, Loan No. 755498, or to such other place as any party may by notice in writing to the other parties designate as a place for service of notice.

15.

Each Guarantor (if more than one) whose signature appears below shall be deemed to be bound by the provisions of this Guaranty and the Guaranteed Obligations, whether each signature was affixed at the same or different times, and the term "Guarantor" as used herein shall be deemed to refer to each individually, as well as collectively, and each of the undersigned shall be jointly and severally liable for the Guaranteed Obligations hereunder, both personally and with recourse, irrespective of the recourse or non-recourse nature of the Underlying Instruments.  Guarantor agrees that if this Guaranty is placed in the hands of an attorney for enforcement, Guarantor will reimburse Lender all expenses incurred, including attorney's fees.

16.

This Guaranty may be executed in counterparts, each of which shall be deemed an original; and such counterparts when taken together shall constitute but one agreement.

17.

Capitalized terms used herein and not otherwise defined shall have the meanings given to them in the Underlying Instruments.

18.

Guarantor hereby irrevocably authorizes Lender to apply any and all amounts received by Lender in repayment of the Loan first to amounts which are not guaranteed pursuant to the terms of any guaranty and then to amounts which are guaranteed pursuant to the terms of any guaranty.  Guarantor hereby waives any and all rights it has or may have under Section 2822 of the California Civil Code which provides that if a guarantor is "liable upon only a portion of an obligation and the principal provides partial satisfaction of the obligation, the principal may designate the portion of the obligation that is to be satisfied."

19.

In the case of a power of sale foreclosure under the Mortgage, the fair market value of the real property collateral shall be conclusively deemed to be the amount of the successful bid at the foreclosure sale.  Guarantor waives any rights or benefits it may now or hereafter have to a fair value hearing under Section 580a of the California Code of Civil Procedure.  Lender shall have absolutely no obligation to make a bid at any foreclosure sale, but rather may make no bid or bid any amount which Lender, in its sole discretion, deems appropriate.

-9-

(Signatures on next page)

-10-

IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be duly executed and delivered as of the date first set forth above.

GUARANTOR:

AIMCO PROPERTIES, L.P., a Delaware limited partnership

By:      AIMCO-GP, Inc., a Delaware   

            corporation, its general partner

            By: s/Patti K. Fielding

       Name:  Patti K. Fielding

       Title:  Executive Vice President  

                              and Treasurer

EX-10

EXHIBIT 10.39

PROPERTY RESERVES AGREEMENT

755498

THIS PROPERTY RESERVES AGREEMENT (as the same may from time to time hereafter be modified, supplemented or amended, this "Agreement") is made as of January  19, 2007 by VMS NATIONAL PROPERTIES, an Illinois general partnership ("Borrower"), and PRINCIPAL LIFE INSURANCE COMPANY, an Iowa corporation ("Lender").

RECITALS

Lender has agreed to make a loan (the "Loan") in the original principal amount of Forty-nine Million and 00/100 Dollars ($49,000,000.00) (the "Loan Amount") to Borrower as set forth in the Loan Documents, executed by and between Lender and Borrower; and

The Loan is evidenced by Borrower's Secured Promissory Note made payable and delivered to Lender (as may be modified, amended, supplemented, extended or consolidated in writing, and any note(s) issued in exchange therefor or in replacement thereof, the "Note") and further evidenced and secured by, among other things, a "Mortgage" (it being agreed that Mortgage as hereinafter used shall be construed to mean "mortgage" or "deed of trust" or "trust deed" or "deed to secure debt" as the context so requires) on certain real estate, together with all existing improvements constructed thereon, said Premises being more particularly described in said Mortgage.

NOW THEREFORE, in consideration of the making of the Loan, the mutual promises and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Lender and Borrower, intending to be legally bound, agree as follows:

1.

Property Reserves.

Borrower has agreed to deposit with Lender  a letter of credit(s) (if more than one, collectively if the context so requires the "Letter of Credit") as detailed below to be held by Lender to reimburse Borrower for the costs of certain capital improvements to the Premises as described in Schedule 1 hereto and such other capital improvements to the Premises that Lender determines, in its sole discretion, provide a material benefit/improvement to the Premises upon completion thereof  (i.e. roof replacement/repair, new decks, rehabilitation of individual units)   ("Capital Improvements").  The Letter of Credit and any renewal or replacement thereof and any proceeds therefrom shall be held by Lender as additional security for the Loan and are hereafter referred to as the "Property Reserves".  The term "Escrow Release" as used herein sha ll refer to a disbursement of funds and/or a reduction of a Letter of Credit, as applicable.

a.

On the Closing Date, Borrower shall deliver an acceptable Letter of Credit in the amount of $1,081,157.00 to cover the cost of Capital Improvements.

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2.

Borrower shall deliver to Lender not later than 30 days prior to the expiration date of any Letter of Credit and any renewal or replacement Letter of Credit, a renewal or replacement unconditional, irrevocable bank Letter of Credit identical in terms and amount and issued by a United States bank acceptable to Lender.  If Borrower shall fail to deliver any renewal or replacement Letter of Credit in accordance with the foregoing requirements, Lender may, in its discretion, draw upon any Letter of Credit then in its possession and hold such proceeds in accordance with the terms hereof.

Lender reserves the right to periodically review the financial condition of the issuing bank for any Letter of Credit and any renewal or replacement Letter of Credit and if Lender determines that the issuing bank no longer satisfies the criteria set forth above, Lender may require a replacement Letter of Credit in form and substance and from a United States bank acceptable to Lender.

3.

Standard Disbursement Requirements.  The following shall be defined as "Standard Disbursement Requirements":

(i)

copies of unconditional lien waivers for work completed which is the subject of the Escrow Release request;

(ii)

a title search in form and substance reasonably acceptable to Lender and if such search discloses conditions unacceptable to Lender or Lender deems it reasonably necessary, then such endorsements or other assurances reasonably satisfactory to Lender from the title insurance company insuring the continued first lien priority of the Mortgage;

(iii)

to the extent Lender deems reasonably necessary and to the extent that same are available and appropriate for the work which is the subject of the Escrow Release request, any or all of the following at Lender's discretion:  (A) all permits, bonds, licenses and approvals, whether necessary for commencement, performance, completion, occupancy, use or otherwise required by any applicable laws for the stage of work so completed; (B) a copy of the construction contract and any change orders and addenda thereto; (C) a statement from an architect, contractor or engineering consultant, in Lender's reasonable discretion, as to the extent and cost of the work so completed; and/or (D) other evidence as reasonably determined by Lender showing that Borrower has completed and performed the portion of the work which is the subject of the Escrow Release request; and

(iv)

Lender having inspected, or having expressly waived in writing such inspection, and approved the completed portion of the work which is the subject of the Escrow Release request.  Lender shall not require said inspection more than once per calendar year.

-3-

4.

Capital Improvements.

a.

Except as hereinafter provided and so long as no Event of Default has occurred and is continuing under the Loan Documents, Lender shall allow Escrow Release(s) in the amounts hereinafter specified in accordance with the following terms and conditions:

(i)

Escrow Release(s) shall be for an amount equal to the actual costs and expenses incurred by Borrower in completing any Capital Improvements;

(ii)

Borrower shall submit written Escrow Release requests to Lender for Capital Improvements no more than once per calendar month and each such request shall be for an aggregate amount of not less than $25,000 (excluding the final disbursement); and

(iii)

Escrow Release(s) shall be conditioned upon Borrower furnishing to Lender with its written request, at Lender's discretion, the Standard Disbursement Requirements.

5.

Interest on Property Reserves.  Provided no Event of Default has occurred under any of the Loan Documents, Lender agrees to credit Borrower with interest earnings on the cash portion of the Property Reserves, (excluding however any cash proceeds resulting from Lender having drawn on any Letter of Credit or any renewal or replacement thereof); provided, however, that interest shall cease to be credited on any portion of the Property Reserves at such time as they have been disbursed to Borrower or otherwise applied in any manner provided in this Agreement or in the other Loan Documents.  Interest shall be credited on the average balance of the cash portion of the Property Reserves for the preceding calendar month or any portion of such preceding calendar month on or before the tenth (10^th) day of each calendar month at a rate equal to the thirty-day average of the daily 30-day Dealer Commercial Paper Rate as p ublished in the Wall Street Journal or similar financial publication, less 200 basis points.  Interest shall be disbursed to Borrower at such time and in the same manner as provided for disbursement of Property Reserves.

6.

Administration/Inspection Fee.  Lender shall be entitled to charge Borrower a reasonable processing fee for administering and reviewing an Escrow Release, not to exceed $500.00.  Lender shall also be entitled to charge Borrower reasonable processing fees both for reviewing any renewal or replacement Letter of Credit which Borrower is required to provide as well as for drawing upon any Letter of Credit held pursuant to the terms hereof (the processing fee for reviewing any renewal or replacement Letter of Credit shall not exceed $250.00).  Borrower shall be responsible for payment of all costs, fees and charges in connection with any reduction, renewal or replacement of the Letter of Credit which are assessed by the issuing bank.  

-4-

Additionally, Lender shall be entitled to charge Borrower for any reasonable costs incurred by Lender in inspecting the Premises, not to exceed $750.00.

7.

Security Agreement.  This Agreement and the escrow of the Property Reserves under the terms hereof are intended to create a prior perfected security interest in the Property Reserves.  As more fully described in the Loan Documents, Borrower has assigned, conveyed, pledged and transferred to Lender and granted to Lender a first and continuing lien on and security interest in and to, among other things, all of Borrower's right, title and interest in and to the Property Reserves, which secure the full and punctual payment and performance of all of the Indebtedness.  Nothing contained herein shall cause Lender to be deemed a trustee of any Letter of Credit, any renewal thereof or any proceeds therefrom.  The Property Reserves shall not constitute any deposit or account of the Borrower or monies to which the Borrower is entitled upon demand, or upon the mere passage of time.  Lender shall not be required to s egregate the Property Reserves or hold them in any separate account for the benefit of the Borrower.  Upon the payment in full of all sums due to Lender under the Loan Documents, Lender shall promptly deliver the then existing Property Reserves to Borrower.

8.

Event of Default.  Upon the occurrence of an Event of Default under any of the Loan Documents, Lender may, with respect to the Property Reserves, or any portion thereof, exercise all enforcement rights and remedies granted to Lender under the Loan Documents and in addition to all other rights and remedies granted to Lender under the Loan Documents, Lender may, at its option, use such funds partially or in full (including any portion or all of the proceeds resulting from drawing on any Letter of Credit), in such order and preference as Lender may determine, to (1) cure or partially cure any Event of Default; (2) complete the work which is the subject of this Agreement; (3) pay any interest accrued under the terms of the Note; (4) pay any other Indebtedness; (5) pay the Make Whole Premium, if any, due and payable; (6) prepay the principal amount of the Loan or any part thereof; or (7) hold such funds in a non-interest bearing account as additional security for the Loan.  In the event the Property Reserves or any portion thereof are applied to prepay the principal amount of the Loan or any part thereof, Borrower waives any right to prepay the principal amount in whole or in part without premium, and agrees to pay, as liquidated damages and not as a penalty, a Make Whole Premium on any principal amount prepaid.  Notwithstanding anything contained herein to the contrary, nothing shall be construed to (a) make Lender responsible for performing or completing the work which is the subject of this Agreement, (b) require Lender to expend sums to complete the work which is the subject of this Agreement which are in excess of such amounts then allocated by Lender for such items, or (c) obligate Lender to demand from Borrower additional sums to complete the work which is the subject of this Agreement.

9.

Cost Overruns.  In the event that the costs and expenses incurred by Borrower in completing any work which is the subject of this Agreement exceed the respective amounts allocated by Lender for such items of expense, Borrower shall be responsible for the payment (from sources other than the Property Reserves) of such excess costs and expenses.

-5-

10.

Notices.  All notices required to be sent hereunder shall be deemed to be an adequate and sufficient notice if given in accordance with the notice provisions of the Mortgage.

11.

Governing Law.  This Agreement shall be governed, construed, and enforced in accordance with the laws of the state in which the Premises is located, without regard to its conflicts of law principles.

12.

Headings.  The headings used herein are for convenience only and are not to be used in interpreting this Agreement.  Capitalized terms used herein and not otherwise defined shall have those meanings given to them in the Loan Documents.  Notwithstanding anything herein to the contrary, the terms and provisions of this Agreement as to Escrow Release(s) shall control over any provisions in the other Loan Documents to the contrary.

13.

Amendments.  This Agreement, and any provisions hereof, may not be modified, amended, waived, extended, changed, discharged or terminated orally or by any act or failure to act on the part of Borrower or Lender, but only by an agreement in writing signed by the parties hereto.

14.

Counterparts.  This Agreement may be executed in counterparts, each of which shall be deemed an original; and such counterparts when taken together shall constitute but one agreement.

15.

Inapplicable Provisions.  If any term, covenant or condition of this Agreement is held to be invalid, illegal or unenforceable in any respect, this Agreement shall be construed without such provision.

16.

Successors and Assigns.  This Agreement and all the provisions hereof shall inure to the benefit of the heirs, successors and assigns of Lender and shall bind the heirs, representatives, and permitted successors and assigns of Borrower.

(Signatures on next page)

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IN WITNESS WHEREOF, Borrower and Lender have hereunto caused this Agreement to be executed the date first above written.

LENDER:

PRINCIPAL LIFE INSURANCE COMPANY, an Iowa corporation

By:

PRINCIPAL REAL ESTATE INVESTORS, LLC, a Delaware limited liability company, its authorized signatory

By

__________________________

Name:

Title:

By

__________________________

Name:

Title:

(Signatures continued on following page)

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BORROWER:

VMS NATIONAL PROPERTIES, an Illinois general partnership

By:

VMS NATIONAL RESIDENTIAL PORTFOLIO I, an Illinois limited partnership

By:

MAERIL, INC., a Delaware  

                        corporation, its general partner

       By: /s/Patti K. Fielding

       Name:  Patti K. Fielding

                Title:  Executive Vice President  

                           and Treasurer

By:

VMS NATIONAL RESIDENTIAL PORTFOLIO II, an Illinois limited partnership

By:

MAERIL, INC., a Delaware  

                        corporation, its general partner

       By: /s/Patti K. Fielding

       Name:  Patti K. Fielding

                Title:  Executive Vice President  

                           and Treasurer

EX-10

EXHIBIT 10.40

After recording return to:

Brian J. Iwashyna, Esquire

Troutman Sanders LLP

P.O. Box 1122

Richmond, Virginia  23218-1122

MULTIFAMILY DEED OF TRUST,

ASSIGNMENT OF RENTS

AND SECURITY AGREEMENT

(OREGON)

Statutory Notice:

A.

The address of the entity holding a lien or other

interest created by this instrument is:

Capmark Finance Inc.

116 Welsh Road

Horsham, Pennsylvania 19044

B.

The tax account number(s) of the Property subject

to the lien or in which the interest is created:

______________________________________

______________________________________

TABLE OF CONTENTS

PAGE

1.

DEFINITIONS.

1

2.

UNIFORM COMMERCIAL CODE SECURITY AGREEMENT.

7

3.

ASSIGNMENT OF RENTS; APPOINTMENT OF RECEIVER; LENDER IN POSSESSION.

7

4.

ASSIGNMENT OF LEASES; LEASES AFFECTING THE MORTGAGED PROPERTY.

9

5.

PAYMENT OF INDEBTEDNESS; PERFORMANCE UNDER LOAN DOCUMENTS; PREPAYMENT PREMIUM.  11

6.

EXCULPATION.

11

7.

DEPOSITS FOR TAXES, INSURANCE AND OTHER CHARGES.

11

8.

COLLATERAL AGREEMENTS.

13

9.

APPLICATION OF PAYMENTS.

13

10.

COMPLIANCE WITH LAWS.

13

11.

USE OF PROPERTY.

13

12.

PROTECTION OF LENDER'S SECURITY.

13

13.

INSPECTION.

14

14.

BOOKS AND RECORDS; FINANCIAL REPORTING.

14

15.

TAXES; OPERATING EXPENSES.

16

16.

LIENS; ENCUMBRANCES.

17

17.

PRESERVATION, MANAGEMENT AND MAINTENANCE OF MORTGAGED PROPERTY.

17

18.

ENVIRONMENTAL HAZARDS.

18

19.

PROPERTY AND LIABILITY INSURANCE.

24

20.

CONDEMNATION.

25

21.

TRANSFERS OF THE MORTGAGED PROPERTY OR INTERESTS IN BORROWER.

26

22.

EVENTS OF DEFAULT.

30

23.

REMEDIES CUMULATIVE.

31

24.

FORBEARANCE.

31

25.

LOAN CHARGES.

32

26.

WAIVER OF STATUTE OF LIMITATIONS.

32

27.

WAIVER OF MARSHALLING.

32

28.

FURTHER ASSURANCES.

33

29.

ESTOPPEL CERTIFICATE.

33

30.

GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE.

33

31.

NOTICE.

33

32.

SALE OF NOTE; CHANGE IN SERVICER.

34

33.

SINGLE ASSET BORROWER.

34

34.

SUCCESSORS AND ASSIGNS BOUND.

34

35.

JOINT AND SEVERAL LIABILITY.

34

36.

RELATIONSHIP OF PARTIES; NO THIRD PARTY BENEFICIARY.

35

37.

SEVERABILITY; AMENDMENTS.

35

38.

CONSTRUCTION.

35

39.

LOAN SERVICING.

35

40.

DISCLOSURE OF INFORMATION.

35

41.

NO CHANGE IN FACTS OR CIRCUMSTANCES.

36

42.

SUBROGATION.

36

43.

ACCELERATION; REMEDIES.

36

44.

RECONVEYANCE.

37

45.

SUBSTITUTE TRUSTEE.

37

46.

USE OF MORTGAGED PROPERTY.

37

47.

ATTORNEYS’ FEES.

37

48.

TIME OF ESSENCE.

37

49.

FORCED PLACEMENT OF INSURANCE NOTICE.

37

50.

NO ORAL COMMITMENTS NOTICE.  

38

51.

WAIVER OF TRIAL BY JURY.

38

The Bluffs Apartments

MULTIFAMILY DEED OF TRUST,

ASSIGNMENT OF RENTS AND

SECURITY AGREEMENT

THIS MULTIFAMILY DEED OF TRUST, ASSIGNMENT OF RENTS AND SECURITY AGREEMENT (the “Instrument”) is made this 18th day of January, 2006, by VMS NATIONAL PROPERTIES, a joint venture general partnership organized and existing under the laws of Illinois, whose address is c/o AIMCO, Stanford Place 3, 4582 South Ulster Street Parkway, Suite 1100, Denver, Colorado 80237, ("Borrower"), as grantor (“Borrower”), to STEWART TITLE GUARANTY COMPANY, as trustee (“Trustee”), for the benefit of CAPMARK FINANCE INC., a corporation organized and existing under the laws of California, whose address is 116 Welsh Road, Horsham, Pennsylvania 19044, Attn: Servicing-Executive Vice President, as beneficiary (“Lender”).

Borrower, in consideration of the Indebtedness and the trust created by this Instrument, irrevocably grants, conveys and assigns to Trustee, in trust, with power of sale, the Mortgaged Property, including the Land located in Clackamas County, State of Oregon and described in Exhibit A attached to this Instrument.

TO SECURE TO LENDER the repayment of the Indebtedness evidenced by Borrower’s Multifamily Note payable to Lender, dated as of the date of this Instrument, and maturing as set forth in the Loan Agreement between Borrower and Lender, in the principal amount of $4,530,257.00, and all renewals, extensions and modifications of the Indebtedness, and the performance of the covenants and agreements of Borrower contained in the Loan Documents.

Borrower covenants that Borrower is lawfully seized of the Mortgaged Property and has the right, power and authority to grant, convey and assign the Mortgaged Property, that the Mortgaged Property is unencumbered, and that Borrower will warrant and defend generally the title to the Mortgaged Property against all claims and demands, subject to any easements and restrictions listed in a schedule of exceptions to coverage in any title insurance policy issued to Lender contemporaneously with the execution and recordation of this Instrument and insuring Lender’s interest in the Mortgaged Property.

Covenants.  Borrower and Lender covenant and agree as follows:

1.

1.    DEFINITIONS.  The following terms, when used in this Instrument (including when used in the above recitals), shall have the following meanings:

(a)

(a)    "Borrower" means all persons or entities identified as "Borrower" in the first paragraph of this Instrument, together with their successors and assigns.

(b)

(b)    "Collateral Agreement" means any separate agreement between Borrower and Lender for the purpose of establishing replacement reserves for the Mortgaged Property, establishing a fund to assure completion of repairs or improvements specified in that agreement, or assuring reduction of the outstanding principal balance of the Indebtedness if the occupancy of or income from the Mortgaged Property does not increase to a level specified in that agreement, or any other agreement or agreements between Borrower and Lender which provide for the establishment of any other fund, reserve or account.

(c)

(c) "Environmental Permit" means any permit, license, or other authorization issued under any Hazardous Materials Law with respect to any activities or businesses conducted on or in relation to the Mortgaged Property.

(d)

(d) "Event of Default" means the occurrence of any event listed in Section 22.

(e)

(e) "Fixtures" means all property which is so attached to the Land or the Improvements as to constitute a fixture under applicable law, including: machinery, equipment, engines, boilers, incinerators, installed building materials; systems and equipment for the purpose of supplying or distributing heating, cooling, electricity, gas, water, air, or light; antennas, cable, wiring and conduits used in connection with radio, television, security, fire prevention, or fire detection or otherwise used to carry electronic signals; telephone systems and equipment; elevators and related machinery and equipment; fire detection, prevention and extinguishing systems and apparatus; security and access control systems and apparatus; plumbing systems; water heaters, ranges, stoves, microwave ovens, refrigerators, dishwashers, garbage disposers, washers, dryers and other appliances; light fixtures, awnings, storm windows and storm doors; pictures, screens, blinds, shades, curtains and curtain rods; mirrors; c abinets, paneling, rugs and floor and wall coverings; fences, trees and plants; swimming pools; and exercise equipment.

(f)

(f) "Governmental Authority" means any board, commission, department or body of any municipal, county, state or federal governmental unit, or any subdivision of any of them, that has or acquires jurisdiction over the Mortgaged Property or the use, operation or improvement of the Mortgaged Property.

(g)

(g) "Hazardous Materials" means petroleum and petroleum products and compounds containing them, including gasoline, diesel fuel and oil; explosives; flammable materials; radioactive materials; polychlorinated biphenyls ("PCBs") and compounds containing them; lead and lead-based paint; asbestos or asbestos-containing materials in any form that is or could become friable; underground or above-ground storage tanks, whether empty or containing any substance; any substance the presence of which on the Mortgaged Property is prohibited by any federal, state or local authority; any substance that requires special handling; and any other material or substance now or in the future defined as a "hazardous substance," "hazardous material," "hazardous waste," "toxic substance," "toxic pollutant," "contaminant," or "pollutant" within the meaning of any Hazardous Materials Law.

(h)

(h) "Hazardous Materials Laws" means all federal, state, and local laws, ordinances and regulations and standards, rules, policies and other governmental requirements, administrative rulings and court judgments and decrees in effect now or in the future and including all amendments, that relate to Hazardous Materials and apply to Borrower or to the Mortgaged Property. Hazardous Materials Laws include, but are not limited to, the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., the Toxic Substance Control Act, 15 U.S.C. Section 2601, et seq., the Clean Water Act, 33 U.S.C. Section 1251, et seq., and the Hazardous Materials Transportation Act, 49 U.S.C. Section 5101, et seq., and their state analogs.

(i)

(i) "Impositions" and "Imposition Deposits" are defined in Section 7(a).

(j)

(j) "Improvements" means the buildings, structures, improvements, and alterations now constructed or at any time in the future constructed or placed upon the Land, including any future replacements and additions.

(k)

(k) "Indebtedness" means the principal of, interest on, and all other amounts due at any time under, the Note, this Instrument or any other Loan Document, including prepayment premiums, late charges, default interest, and advances as provided in Section 12 to protect the security of this Instrument.

(l)

(l) [Intentionally omitted]

(m)

(m) "Key Principal" means the natural person(s) or entity identified as such at the foot of this Instrument, and any person or entity who becomes a Key Principal after the date of this Instrument and is identified as such in an amendment or supplement to this Instrument.

(n)

(n) "Land" means the land described in Exhibit A.

(o)

(o) "Leases" means all present and future leases, subleases, licenses, concessions or grants or other possessory interests now or hereafter in force, whether oral or written, covering or affecting the Mortgaged Property, or any portion of the Mortgaged Property (including proprietary leases or occupancy agreements if Borrower is a cooperative housing corporation), and all modifications, extensions or renewals.

(p)

(p) "Lender" means the entity identified as "Lender" in the first paragraph of this Instrument and its successors and assigns, or any subsequent holder of the Note.

(q)

(q) "Loan Documents" means the Note, this Instrument, all guaranties, all indemnity agreements, all Collateral Agreements, O&M Programs, and any other documents now or in the future executed by Borrower, Key Principal, any guarantor or any other person in connection with the loan evidenced by the Note, as such documents may be amended from time to time.

(r)

(r) "Loan Servicer" means the entity that from time to time is designated by Lender to collect payments and deposits and receive notices under the Note, this Instrument and any other Loan Document, and otherwise to service the loan evidenced by the Note for the benefit of Lender.  Unless Borrower receives notice to the contrary, the Loan Servicer is the entity identified as "Lender" in the first paragraph of this Instrument.

(s)

(s) "Mortgaged Property" means all of Borrower's present and future right, title and interest in and to all of the following:

(1)

the Land;

(2)

the Improvements;

(3)

the Fixtures;

(4)

the Personalty;

(5)

all current and future rights, including air rights, development rights, zoning rights and other similar rights or interests, easements, tenements, rights-of-way, strips and gores of land, streets, alleys, roads, sewer rights, waters, watercourses, and appurtenances related to or benefitting the Land or the Improvements, or both, and all rights-of-way, streets, alleys and roads which may have been or may in the future be vacated;

(6)

all proceeds paid or to be paid by any insurer of the Land, the Improvements, the Fixtures, the Personalty or any other part of the Mortgaged Property, whether or not Borrower obtained the insurance pursuant to Lender s requirement;

(7)

all awards, payments and other compensation made or to be made by any municipal, state or federal authority with respect to the Land, the Improvements, the Fixtures, the Personalty or any other part of the Mortgaged Property, including any awards or settlements resulting from condemnation proceedings or the total or partial taking of the Land, the Improvements, the Fixtures, the Personalty or any other part of the Mortgaged Property under the power of eminent domain or otherwise and including any conveyance in lieu thereof;

(8)

all contracts, options and other agreements for the sale of the Land, the Improvements, the Fixtures, the Personalty or any other part of the Mortgaged Property entered into by Borrower now or in the future, including cash or securities deposited to secure performance by parties of their obligations;

(9)

all proceeds from the conversion, voluntary or involuntary, of any of the above into cash or liquidated claims, and the right to collect such proceeds;

(10)

all Rents and Leases;

(11)

all earnings, royalties, accounts receivable, issues and profits from the Land, the Improvements or any other part of the Mortgaged Property, and all undisbursed proceeds of the loan secured by this Instrument and, if Borrower is a cooperative housing corporation, maintenance charges or assessments payable by shareholders or residents;

(12)

all Imposition Deposits;

(13)

all refunds or rebates of Impositions by any municipal, state or federal authority or insurance company (other than refunds applicable to periods before the real property tax year in which this Instrument is dated);

(14)

all tenant security deposits which have not been forfeited by any tenant under any Lease; and

(15)

all names under or by which any of the above Mortgaged Property may be operated or known, and all trademarks, trade names, and goodwill relating to any of the Mortgaged Property.

(t)

(t) "Note" means the Multifamily Note described on page 1 of this Instrument, including the Acknowledgment and Agreement of Key Principal to Personal Liability for Exceptions to Non-Recourse Liability (if any), and all schedules, riders, allonges and addenda, as such Multifamily Note may be amended from time to time.

(u)

(u) "O&M Program" is defined in Section 18(a).

(v)

(v) "Personalty" means all equipment, inventory, general intangibles which are used now or in the future in connection with the ownership, management or operation of the Land or the Improvements or are located on the Land or in the Improvements, including furniture, furnishings, machinery, building materials, appliances, goods, supplies, tools, books, records (whether in written or electronic form), computer equipment (hardware and software) and other tangible personal property (other than Fixtures) which are used now or in the future in connection with the ownership, management or operation of the Land or the Improvements or are located on the Land or in the Improvements, and any operating agreements relating to the Land or the Improvements, and any surveys, plans and specifications and contracts for architectural, engineering and construction services relating to the Land or the Improvements and all other intangible property and rights relating to the operation of, or used in connection wi th, the Land or the Improvements, including all governmental permits relating to any activities on the Land.

(w)

(w) "Property Jurisdiction" is defined in Section 30(a).

(x)

(x) "Rents" means all rents (whether from residential or non-residential space), revenues and other income of the Land or the Improvements, including subsidy payments received from any sources (including, but not limited to payments under any Housing Assistance Payments Contract) parking fees, laundry and vending machine income and fees and charges for food, health care and other services provided at the Mortgaged Property, whether now due, past due, or to become due, and deposits forfeited by tenants.

(y)

(y) "Taxes" means all taxes, assessments, vault rentals and other charges, if any, general, special or otherwise, including all assessments for schools, public betterments and general or local improvements, which are levied, assessed or imposed by any public authority or quasi-public authority, and which, if not paid, will become a lien, on the Land or the Improvements.

(z)

(z) "Transfer" means (A) a sale, assignment, transfer or other disposition (whether voluntary, involuntary or by operation of law); (B) the granting, creating or attachment of a lien, encumbrance or security interest (whether voluntary, involuntary or by operation of law); (C) the issuance or other creation of an ownership interest in a legal entity, including a partnership interest, interest in a limited liability company or corporate stock; (D) the withdrawal, retirement, removal or involuntary resignation of a partner in a partnership or a member or manager in a limited liability company; or (E) the merger, dissolution, liquidation, or consolidation of a legal entity.  "Transfer" does not include (i) a conveyance of the Mortgaged Property at a judicial or non-judicial foreclosure sale under this Instrument or (ii) the Mortgaged Property becoming part of a bankruptcy estate by operation of law under the United States Bankruptcy Code.  For purposes of defining the term & quot;Transfer," the term "partnership" shall mean a general partnership, a limited partnership, a joint venture and a limited liability partnership, and the term "partner" shall mean a general partner, a limited partner and a joint venturer.

2.

2.    UNIFORM COMMERCIAL CODE SECURITY AGREEMENT. This Instrument is also a security agreement under the Uniform Commercial Code for any of the Mortgaged Property which, under applicable law, may be subject to a security interest under the Uniform Commercial Code, whether acquired now or in the future, and all products and cash and non-cash proceeds thereof (collectively, "UCC Collateral"), and Borrower hereby grants to Lender a security interest in the UCC Collateral.  Borrower hereby authorizes Lender to file financing statements, continuation statements and financing statement amendments, in such form as Lender may require to perfect or continue the perfection of this security interest and Borrower agrees, if Lender so requests, to execute and deliver to Lender such financing statements, continuation statements and amendments.  Borrower shall pay all filing costs and all costs and expenses of any record searches for financing statem ents that Lender may require.  Without the prior written consent of Lender, Borrower shall not create or permit to exist any other lien or security interest in any of the UCC Collateral.  If an Event of Default has occurred and is continuing, Lender shall have the remedies of a secured party under the Uniform Commercial Code, in addition to all remedies provided by this Instrument or existing under applicable law.  In exercising any remedies, Lender may exercise its remedies against the UCC Collateral separately or together, and in any order, without in any way affecting the availability of Lender's other remedies.  This Instrument constitutes a financing statement with respect to any part of the Mortgaged Property which is or may become a Fixture.

3.

3.    ASSIGNMENT OF RENTS; APPOINTMENT OF RECEIVER; LENDER IN POSSESSION.

(a)

(a) As part of the consideration for the Indebtedness, Borrower absolutely and unconditionally assigns and transfers to Lender all Rents. It is the intention of Borrower to establish a present, absolute and irrevocable transfer and assignment to Lender of all Rents and to authorize and empower Lender to collect and receive all Rents without the necessity of further action on the part of Borrower.  Promptly upon request by Lender, Borrower agrees to execute and deliver such further assignments as Lender may from time to time require.  Borrower and Lender intend this assignment of Rents to be immediately effective and to constitute an absolute present assignment and not an assignment for additional security only.  For purposes of giving effect to this absolute assignment of Rents, and for no other purpose, Rents shall not be deemed to be a part of the "Mortgaged Property," as that term is defined in Section 1(s).  However, if this present, absolute and unconditional assignment of Rents is not enforceable by its terms under the laws of the Property Jurisdiction, then the Rents shall be included as a part of the Mortgaged Property and it is the intention of the Borrower that in this circumstance this Instrument create and perfect a lien on Rents in favor of Lender, which lien shall be effective as of the date of this Instrument.

(b)

(b) After the occurrence of an Event of Default, Borrower authorizes Lender to collect, sue for and compromise Rents and directs each tenant of the Mortgaged Property to pay all Rents to, or as directed by, Lender, and Borrower shall, upon Borrower’s receipt of any Rents from any sources (including, but not limited to subsidy payments under any Housing Assistance Payments Contract), pay the total amount of such receipts to the Lender.  However, until the occurrence of an Event of Default, Lender hereby grants to Borrower a revocable license to collect and receive all Rents, to hold all Rents in trust for the benefit of Lender and to apply all Rents to pay the installments of interest and principal then due and payable under the Note and the other amounts then due and payable under the other Loan Documents, including Imposition Deposits, and to pay the current costs and expenses of managing, operating and maintaining the Mortgaged Property, including utilities, Taxes and insurance premiums (to the e xtent not included in Imposition Deposits), tenant improvements and other capital expenditures.  So long as no Event of Default has occurred and is continuing, the Rents remaining after application pursuant to the preceding sentence may be retained by Borrower free and clear of, and released from, Lender's rights with respect to Rents under this Instrument.  From and after the occurrence of an Event of Default, and without the necessity of Lender entering upon and taking and maintaining control of the Mortgaged Property directly, or by a receiver, Borrower s license to collect Rents shall automatically terminate and Lender shall without notice be entitled to all Rents as they become due and payable, including Rents then due and unpaid.  Borrower shall pay to Lender upon demand all Rents to which Lender is entitled.  At any time on or after the date of Lender s demand for Rents, Lender may give, and Borrower hereby irrevocably authorizes Lender to give, notice to all tenants of the Mortgag ed Property instructing them to pay all Rents to Lender, no tenant shall be obligated to inquire further as to the occurrence or continuance of an Event of Default, and no tenant shall be obligated to pay to Borrower any amounts which are actually paid to Lender in response to such a notice.  Any such notice by Lender shall be delivered to each tenant personally, by mail or by delivering such demand to each rental unit.  Borrower shall not interfere with and shall cooperate with Lender's collection of such Rents.

(c)

(c) Borrower represents and warrants to Lender that Borrower has not executed any prior assignment of Rents (other than an assignment of Rents securing indebtedness that will be paid off and discharged with the proceeds of the loan evidenced by the Note), that Borrower has not performed, and Borrower covenants and agrees that it will not perform, any acts and has not executed, and shall not execute, any instrument which would prevent Lender from exercising its rights under this Section 3, and that at the time of execution of this Instrument there has been no anticipation or prepayment of any Rents for more than two months prior to the due dates of such Rents.  Borrower shall not collect or accept payment of any Rents more than two months prior to the due dates of such Rents.

(d)

(d) If an Event of Default has occurred and is continuing, Lender may, regardless of the adequacy of Lender's security or the solvency of Borrower and even in the absence of waste, enter upon and take and maintain full control of the Mortgaged Property in order to perform all acts that Lender in its discretion determines to be necessary or desirable for the operation and maintenance of the Mortgaged Property, including the execution, cancellation or modification of Leases, the collection of all Rents, the making of repairs to the Mortgaged Property and the execution or termination of contracts providing for the management, operation or maintenance of the Mortgaged Property, for the purposes of enforcing the assignment of Rents pursuant to Section 3(a), protecting the Mortgaged Property or the security of this Instrument, or for such other purposes as Lender in its discretion may deem necessary or desirable.  Alternatively, if an Event of Default has occurred and is continuing, regardless of the adequacy of Lender's security, without regard to Borrower s solvency and without the necessity of giving prior notice (oral or written) to Borrower, Lender may apply to any court having jurisdiction for the appointment of a receiver for the Mortgaged Property to take any or all of the actions set forth in the preceding sentence.  If Lender elects to seek the appointment of a receiver for the Mortgaged Property at any time after an Event of Default has occurred and is continuing, Borrower, by its execution of this Instrument, expressly consents to the appointment of such receiver, including the appointment of a receiver ex parte if permitted by applicable law.  Lender or the receiver, as the case may be, shall be entitled to receive a reasonable fee for managing the Mortgaged Property.  Immediately upon appointment of a receiver or immediately upon the Lender's entering upon and taking possession and control of the Mortgaged Property, Borrower shall surrender possession of the Mortgaged Property to Lender or the receiver, as the case may be, and shall deliver to Lender or the receiver, as the case may be, all documents, records (including records on electronic or magnetic media), accounts, surveys, plans, and specifications relating to the Mortgaged Property and all security deposits and prepaid Rents.  In the event Lender takes possession and control of the Mortgaged Property, Lender may exclude Borrower and its representatives from the Mortgaged Property.  Borrower acknowledges and agrees that the exercise by Lender of any of the rights conferred under this Section 3 shall not be construed to make Lender a mortgagee-in-possession of the Mortgaged Property so long as Lender has not itself entered into actual possession of the Land and Improvements.

(e)

(e) If Lender enters the Mortgaged Property, Lender shall be liable to account only to Borrower and only for those Rents actually received.  Lender shall not be liable to Borrower, anyone claiming under or through Borrower or anyone having an interest in the Mortgaged Property, by reason of any act or omission of Lender under this Section 3, and Borrower hereby releases and discharges Lender from any such liability to the fullest extent permitted by law.

(f)

(f) If the Rents are not sufficient to meet the costs of taking control of and managing the Mortgaged Property and collecting the Rents, any funds expended by Lender for such purposes shall become an additional part of the Indebtedness as provided in Section 12.

(g)

(g) Any entering upon and taking of control of the Mortgaged Property by Lender or the receiver, as the case may be, and any application of Rents as provided in this Instrument shall not cure or waive any Event of Default or invalidate any other right or remedy of Lender under applicable law or provided for in this Instrument.

4.

4. ASSIGNMENT OF LEASES; LEASES AFFECTING THE MORTGAGED PROPERTY.

(a)

(a) As part of the consideration for the Indebtedness, Borrower absolutely and unconditionally assigns and transfers to Lender all of Borrower's right, title and interest in, to and under the Leases, including Borrower's right, power and authority to modify the terms of any such Lease, or extend or terminate any such Lease.   It is the intention of Borrower to establish a present, absolute and irrevocable transfer and assignment to Lender of all of Borrower’s right, title and interest in, to and under the Leases.  Borrower and Lender intend this assignment of the Leases to be immediately effective and to constitute an absolute present assignment and not an assignment for additional security only.  For purposes of giving effect to this absolute assignment of the Leases, and for no other purpose, the Leases shall not be deemed to be a part of the “Mortgaged Property,” as that term is defined in Section 1(s).  However, if this present, absolute and unconditional assignmen t of the Leases is not enforceable by its terms under the laws of the Property Jurisdiction, then the Leases shall be included as a part of the Mortgaged Property and it is the intention of the Borrower that in this circumstance this Instrument create and perfect a lien on the Leases in favor of Lender, which lien shall be effective as of the date of this Instrument.

(b)

(b) Until Lender gives notice to Borrower of Lender's exercise of its rights under this Section 4, Borrower shall have all rights, power and authority granted to Borrower under any Lease (except as otherwise limited by this Section or any other provision of this Instrument), including the right, power and authority to modify the terms of any Lease or extend or terminate any Lease.  Upon the occurrence of an Event of Default, the permission given to Borrower pursuant to the preceding sentence to exercise all rights, power and authority under Leases shall automatically terminate.  Borrower shall comply with and observe Borrower's obligations under all Leases, including Borrower's obligations pertaining to the maintenance and disposition of tenant security deposits.

(c)

(c) Borrower acknowledges and agrees that the exercise by Lender, either directly or by a receiver, of any of the rights conferred under this Section 4 shall not be construed to make Lender a mortgagee-in-possession of the Mortgaged Property so long as Lender has not itself entered into actual possession of the Land and the Improvements.  The acceptance by Lender of the assignment of the Leases pursuant to Section 4(a) shall not at any time or in any event obligate Lender to take any action under this Instrument or to expend any money or to incur any expenses.  Lender shall not be liable in any way for any injury or damage to person or property sustained by any person or persons, firm or corporation in or about the Mortgaged Property.  Prior to Lender's actual entry into and taking possession of the Mortgaged Property, Lender shall not (i) be obligated to perform any of the terms, covenants and conditions contained in any Lease (or otherwise have any obligation with respect to any Le ase); (ii) be obligated to appear in or defend any action or proceeding relating to the Lease or the Mortgaged Property; or (iii) be responsible for the operation, control, care, management or repair of the Mortgaged Property or any portion of the Mortgaged Property.  The execution of this Instrument by Borrower shall constitute conclusive evidence that all responsibility for the operation, control, care, management and repair of the Mortgaged Property is and shall be that of Borrower, prior to such actual entry and taking of possession.

(d)

(d) Upon delivery of notice by Lender to Borrower of Lender's exercise of Lender's rights under this Section 4 at any time after the occurrence of an Event of Default, and without the necessity of Lender entering upon and taking and maintaining control of the Mortgaged Property directly, by a receiver, or by any other manner or proceeding permitted by the laws of the Property Jurisdiction, Lender immediately shall have all rights, powers and authority granted to Borrower under any Lease, including the right, power and authority to modify the terms of any such Lease, or extend or terminate any such Lease.

(e)

(e) Borrower shall, promptly upon Lender's request, deliver to Lender an executed copy of each residential Lease then in effect. All Leases for residential dwelling units shall be on forms approved by Lender, shall be for initial terms of at least six months and not more than two years, and shall not include options to purchase.  If customary in the applicable market, residential Leases with terms of less than six months may be permitted with Lender's prior written consent.

(f)

(f) Borrower shall not lease any portion of the Mortgaged Property for non-residential use except with the prior written consent of Lender and Lender's prior written approval of the Lease agreement.  Borrower shall not modify the terms of, or extend or terminate, any Lease for non-residential use (including any Lease in existence on the date of this Instrument) without the prior written consent of Lender.  Borrower shall, without request by Lender, deliver an executed copy of each non-residential Lease to Lender promptly after such Lease is signed.   All non-residential Leases, including renewals or extensions of existing Leases, shall specifically provide that (1) such Leases are subordinate to the lien of this Instrument (unless waived in writing by Lender); (2) the tenant shall attorn to Lender and any purchaser at a foreclosure sale, such attornment to be self-executing and effective upon acquisition of title to the Mortgaged Property by any purchaser at a foreclosure sale or by Lende r in any manner; (3) the tenant agrees to execute such further evidences of attornment as Lender or any purchaser at a foreclosure sale may from time to time request; (4) the Lease shall not be terminated by foreclosure or any other transfer of the Mortgaged Property; (5) after a foreclosure sale of the Mortgaged Property, Lender or any other purchaser at such foreclosure sale may, at Lender's or such purchaser's option, accept or terminate such Lease; and (6) the tenant shall, upon receipt after the occurrence of an Event of Default of a written request from Lender, pay all Rents payable under the Lease to Lender.

(g)

(g) Borrower shall not receive or accept Rent under any Lease (whether residential or non-residential) for more than two months in advance.

5.

5. PAYMENT OF INDEBTEDNESS; PERFORMANCE UNDER LOAN DOCUMENTS; PREPAYMENT PREMIUM.  Borrower shall pay the Indebtedness when due in accordance with the terms of the Note and the other Loan Documents and shall perform, observe and comply with all other provisions of the Note and the other Loan Documents.  Borrower shall pay a prepayment premium in connection with certain prepayments of the Indebtedness, including a payment made after Lender's exercise of any right of acceleration of the Indebtedness, as provided in the Note.

6.

6. EXCULPATION.  Borrower s personal liability for payment of the Indebtedness and for performance of the other obligations to be performed by it under this Instrument is limited in the manner, and to the extent, provided in the Note.

7.

7. DEPOSITS FOR TAXES, INSURANCE AND OTHER CHARGES.

(a)

(a) Borrower shall deposit with Lender on the day monthly installments of principal or interest, or both, are due under the Note (or on another day designated in writing by Lender), until the Indebtedness is paid in full, an additional amount sufficient to accumulate with Lender the entire sum required to pay, when due (1) any water and sewer charges which, if not paid, may result in a lien on all or any part of the Mortgaged Property, (2) the premiums for fire and other hazard insurance, rent loss insurance and such other insurance as Lender may require under Section 19, (3) Taxes, and (4) amounts for other charges and expenses which Lender at any time reasonably deems necessary to protect the Mortgaged Property, to prevent the imposition of liens on the Mortgaged Property, or otherwise to protect Lender's interests, all as reasonably estimated from time to time by Lender.  The amounts deposited under the preceding sentence are collectively referred to in this Instrument as the "Imposition Deposits".  The obligations of Borrower for which the Imposition Deposits are required are collectively referred to in this Instrument as "Impositions".  The amount of the Imposition Deposits shall be sufficient to enable Lender to pay each Imposition before the last date upon which such payment may be made without any penalty or interest charge being added.  Lender shall maintain records indicating how much of the monthly Imposition Deposits and how much of the aggregate Imposition Deposits held by Lender are held for the purpose of paying Taxes, insurance premiums and each other obligation of Borrower for which Imposition Deposits are required.  Any waiver by Lender of the requirement that Borrower remit Imposition Deposits to Lender may be revoked by Lender, in Lender's discretion, at any time upon notice to Borrower.

(b)

(b) Imposition Deposits shall be held in an institution (which may be Lender, if Lender is such an institution) whose deposits or accounts are insured or guaranteed by a federal agency.  Lender shall not be obligated to open additional accounts or deposit Imposition Deposits in additional institutions when the amount of the Imposition Deposits exceeds the maximum amount of the federal deposit insurance or guaranty.  Lender shall apply the Imposition Deposits to pay Impositions so long as no Event of Default has occurred and is continuing.  Unless applicable law requires, Lender shall not be required to pay Borrower any interest, earnings or profits on the Imposition Deposits.  Borrower hereby pledges and grants to Lender a security interest in the Imposition Deposits as additional security for all of Borrower's obligations under this Instrument and the other Loan Documents.  Any amounts deposited with Lender under this Section 7 shall not be trust funds, nor shall they operate t o reduce the Indebtedness, unless applied by Lender for that purpose under Section 7(e).

(c)

(c) If Lender receives a bill or invoice for an Imposition, Lender shall pay the Imposition from the Imposition Deposits held by Lender.  Lender shall have no obligation to pay any Imposition to the extent it exceeds Imposition Deposits then held by Lender.  Lender may pay an Imposition according to any bill, statement or estimate from the appropriate public office or insurance company without inquiring into the accuracy of the bill, statement or estimate or into the validity of the Imposition.

(d)

(d) If at any time the amount of the Imposition Deposits held by Lender for payment of a specific Imposition exceeds the amount reasonably deemed necessary by Lender, the excess shall be credited against future installments of Imposition Deposits.  If at any time the amount of the Imposition Deposits held by Lender for payment of a specific Imposition is less than the amount reasonably estimated by Lender to be necessary, Borrower shall pay to Lender the amount of the deficiency within 15 days after notice from Lender.

(e)

(e) If an Event of Default has occurred and is continuing, Lender may apply any Imposition Deposits, in any amounts and in any order as Lender determines, in Lender's discretion, to pay any Impositions or as a credit against the Indebtedness. Upon payment in full of the Indebtedness, Lender shall refund to Borrower any Imposition Deposits held by Lender.

8.

8. COLLATERAL AGREEMENTS.  Borrower shall deposit with Lender such amounts as may be required by any Collateral Agreement and shall perform all other obligations of Borrower under each Collateral Agreement.

9.

9. APPLICATION OF PAYMENTS.  If at any time Lender receives, from Borrower or otherwise, any amount applicable to the Indebtedness which is less than all amounts due and payable at such time, then Lender may apply that payment to amounts then due and payable in any manner and in any order determined by Lender, in Lender's discretion.  Neither Lender's acceptance of an amount which is less than all amounts then due and payable nor Lender's application of such payment in the manner authorized shall constitute or be deemed to constitute either a waiver of the unpaid amounts or an accord and satisfaction.  Notwithstanding the application of any such amount to the Indebtedness,  Borrower s obligations under this Instrument and the Note shall remain unchanged.

10.

10. COMPLIANCE WITH LAWS.  Borrower shall comply with all laws, ordinances, regulations and requirements of any Governmental Authority and all recorded lawful covenants and agreements relating to or affecting the Mortgaged Property, including all laws, ordinances, regulations, requirements and covenants pertaining to health and safety, construction of improvements on the Mortgaged Property, fair housing, zoning and land use, and Leases.  Borrower also shall comply with all applicable laws that pertain to the maintenance and disposition of tenant security deposits.  Borrower shall at all times maintain records sufficient to demonstrate  compliance with the provisions of this Section 10.  Borrower shall take appropriate measures to prevent, and shall not engage in or knowingly permit, any illegal activities at the Mortgaged Property that could endanger tenants or visitors, result in damage to the Mortgaged Property, result in forfeiture of the Mortgaged Property, or otherwise materially impair the lien created by this Instrument or Lender's interest in the Mortgaged Property.  Borrower represents and warrants to Lender that no portion of the Mortgaged Property has been or will be purchased with the proceeds of any illegal activity.

11.

11. USE OF PROPERTY.  Unless required by applicable law, Borrower shall not (a) except for any change in use approved by Lender, allow changes in the use for which all or any part of the Mortgaged Property is being used at the time this Instrument was executed, (b) convert any individual dwelling units or common areas to commercial use, (c) initiate or acquiesce in a change in the zoning classification of the Mortgaged Property, or (d) establish any condominium or cooperative regime with respect to the Mortgaged Property.

12.

12. PROTECTION OF LENDER'S SECURITY.

(a)

(a) If Borrower fails to perform any of its obligations under this Instrument or any other Loan Document, or if any action or proceeding is commenced which purports to affect the Mortgaged Property, Lender's security or Lender's rights under this Instrument, including eminent domain, insolvency, code enforcement, civil or criminal forfeiture, enforcement of Hazardous Materials Laws, fraudulent conveyance or reorganizations or proceedings involving a bankrupt or decedent, then Lender at Lender's option may make such appearances, disburse such sums and take such actions as Lender reasonably deems necessary to perform such obligations of Borrower and to protect Lender's interest, including (1) payment of fees and out-of-pocket expenses of attorneys, accountants, inspectors and consultants, (2) entry upon the Mortgaged Property to make repairs or secure the Mortgaged Property, (3) procurement of the insurance required by Section 19, and (4) payment of amounts which Borrower has failed to pay under Sections& nbsp;15 and 17.

(b)

(b) Any amounts disbursed by Lender under this Section 12, or under any other provision of this Instrument that treats such disbursement as being made under this Section 12, shall be added to, and become part of, the principal component of the Indebtedness, shall be immediately due and payable and shall bear interest from the date of disbursement until paid at the "Default Rate", as defined in the Note.

(c)

(c) Nothing in this Section 12 shall require Lender to incur any expense or take any action.

13.

13. INSPECTION.  Lender, its agents, representatives, and designees may make or cause to be made entries upon and inspections of the Mortgaged Property (including environmental inspections and tests) during normal business hours, or at any other reasonable time.

14.

14. BOOKS AND RECORDS; FINANCIAL REPORTING.

(a)

(a) Borrower shall keep and maintain at all times at the Mortgaged Property or the management agent's offices, and upon Lender's request shall make available at the Mortgaged Property, complete and accurate books of account and records (including copies of supporting bills and invoices) adequate to reflect correctly the operation of the Mortgaged Property, and copies of all written contracts, Leases, and other instruments which affect the Mortgaged Property.  The books, records, contracts, Leases and other instruments shall be subject to examination and inspection at any reasonable time by Lender.

(b)

(b) Borrower shall furnish to Lender all of the following:

(1)

within 120 days after the end of each fiscal year of Borrower, a statement of income and expenses for Borrower's operation of the Mortgaged Property for that fiscal year, a statement of changes in financial position of Borrower relating to the Mortgaged Property for that fiscal year and, when requested by Lender, a balance sheet showing all assets and liabilities of Borrower relating to the Mortgaged Property as of the end of that fiscal year;

(2)

within 120 days after the end of each fiscal year of Borrower, and at any other time upon Lender's request, a rent schedule for the Mortgaged Property showing the name of each tenant, and for each tenant, the space occupied, the lease expiration date, the rent payable for the current month, the date through which rent has been paid, and any related information requested by Lender;

(3)

within 120 days after the end of each fiscal year of Borrower, and at any other time upon Lender's request, an accounting of all security deposits held pursuant to all Leases, including the name of the institution (if any) and the names and identification numbers of the accounts (if any) in which such security deposits are held and the name of the person to contact at such financial institution, along with any authority or release necessary for Lender to access information regarding such accounts;

(4)

within 120 days after the end of each fiscal year of Borrower, and at any other time upon Lender's request, a statement that identifies all owners of any interest in Borrower and the interest held by each, if Borrower is a corporation, all officers and directors of Borrower, and if Borrower is a limited liability company, all managers who are not members;

(5)

upon Lender's request, a monthly property management report for the Mortgaged Property, showing the number of inquiries made and rental applications received from tenants or prospective tenants and deposits received from tenants and any other information requested by Lender;

(6)

upon Lender's request, a balance sheet, a statement of income and expenses for Borrower and a statement of changes in financial position of Borrower for Borrower's most recent fiscal year; and

(7)

if required by Lender, a statement of income and expense for the Mortgaged Property for the prior month or quarter.

(c)

(c) Each of the statements, schedules and reports required by Section 14(b) shall be certified to be complete and accurate by an individual having authority to bind Borrower, and shall be in such form and contain such detail as Lender may reasonably require.  Lender also may require that any statements, schedules or reports be audited at Borrower's expense by independent certified public accountants acceptable to Lender.

(d)

(d) If Borrower fails to provide in a timely manner the statements, schedules and reports required by Section 14(b), Lender shall have the right to have Borrower's books and records audited, at Borrower s expense, by independent certified public accountants selected by Lender in order to obtain such statements, schedules and reports, and all related costs and expenses of Lender shall become immediately due and payable and shall become an additional part of the Indebtedness as provided in Section 12.

(e)

(e) If an Event of Default has occurred and is continuing, Borrower shall deliver to Lender upon written demand all books and records relating to the Mortgaged Property or its operation.

(f)

(f) Borrower authorizes Lender to obtain a credit report on Borrower at any time.

(g)

(g) If an Event of Default has occurred and Lender has not previously required Borrower to furnish a quarterly statement of income and expense for the Mortgaged Property, Lender may require Borrower to furnish such a statement within 45 days after the end of each fiscal quarter of Borrower following such Event of Default.

15.

15. TAXES; OPERATING EXPENSES.

(a)

(a) Subject to the provisions of Section 15(c) and Section 15(d), Borrower shall pay, or cause to be paid, all Taxes when due and before the addition of any interest, fine, penalty  or cost for nonpayment.  

(b)

(b) Subject to the provisions of Section 15(c), Borrower shall pay the expenses of operating, managing, maintaining and repairing the Mortgaged Property (including insurance premiums, utilities, repairs and replacements) before the last date upon which each such payment may be made without any penalty or interest charge being added.

(c)

(c) As long as no Event of Default exists and Borrower has timely delivered to Lender any bills or premium notices that it has received, Borrower shall not be obligated to pay Taxes, insurance premiums or any other individual Imposition to the extent that sufficient Imposition Deposits are held by Lender for the purpose of paying that specific Imposition.  If an Event of Default exists, Lender may exercise any rights Lender may have with respect to Imposition Deposits without regard to whether Impositions are then due and payable.  Lender shall have no liability to Borrower for failing to pay any Impositions to the extent that any Event of Default has occurred and is continuing, insufficient Imposition Deposits are held by Lender at the time an Imposition becomes due and payable or Borrower has failed to provide Lender with bills and premium notices as provided above.

(d)

(c) Borrower, at its own expense, may contest by appropriate legal proceedings, conducted diligently and in good faith, the amount or validity of any Imposition other than insurance premiums, if (1) Borrower notifies Lender of the commencement or expected commencement of such proceedings, (2) the Mortgaged Property is not in danger of being sold or forfeited, (3) Borrower deposits with Lender reserves sufficient to pay the contested Imposition, if requested by Lender, and (4) Borrower furnishes whatever additional security is required in the proceedings or is reasonably requested by Lender, which may include the delivery to Lender of the reserves established by Borrower to pay the contested Imposition.

(e)

(d) Borrower shall promptly deliver to Lender a copy of all notices of, and invoices for, Impositions, and if Borrower pays any Imposition directly, Borrower shall promptly furnish to Lender receipts evidencing such payments.

16.

16. LIENS; ENCUMBRANCES.  Borrower acknowledges that, to the extent provided in Section 21, the grant, creation or existence of any mortgage, deed of trust, deed to secure debt, security interest or other lien or encumbrance (a "Lien") on the Mortgaged Property (other than the lien of this Instrument) or on certain ownership interests in Borrower, whether voluntary, involuntary or by operation of law, and whether or not such Lien has priority over the lien of this Instrument, is a "Transfer" which constitutes an Event of Default.

17.

17. PRESERVATION, MANAGEMENT AND MAINTENANCE OF MORTGAGED PROPERTY.  

(a)

(a) Borrower (1) shall not commit waste or permit impairment or deterioration of the Mortgaged Property, (2) shall not abandon the Mortgaged Property, (3) shall restore or repair promptly, in a good and workmanlike manner, any damaged part of the Mortgaged Property to the equivalent of its original condition, or such other condition as Lender may approve in writing, whether or not insurance proceeds or condemnation awards are available to cover any costs of such restoration or repair, (4) shall keep the Mortgaged Property in good repair, including the replacement of Personalty and Fixtures with items of equal or better function and quality, (5) shall provide for professional management of the Mortgaged Property by a residential rental property manager satisfactory to Lender under a contract approved by Lender in writing, and (6) shall give notice to Lender of and, unless otherwise directed in writing by Lender, shall appear in and defend any action or proceeding purporting to affect the Mortgaged Property, L ender's security or Lender's rights under this Instrument.  Borrower shall not (and shall not permit any tenant or other person to) remove, demolish or alter the Mortgaged Property or any part of the Mortgaged Property except in connection with the replacement of tangible Personalty.

(b)

(b) If, in connection with the making of the loan evidenced by the Note or at any later date, Lender waives in writing the requirement of Section 17(a)(5) above that Borrower enter into a written contract for management of the Mortgaged Property and if, after the date of this Instrument, Borrower intends to change the management of the Mortgaged Property, Lender shall have the right to approve such new property manager and the written contract for the management of the Mortgaged Property and require that Borrower and such new property manager enter into an Assignment of Management Agreement on a form approved by Lender.  If required by Lender (whether before or after an Event of Default), Borrower will cause any Affiliate of Borrower to whom fees are payable for the management of the Mortgaged Property to enter into an agreement with Lender, in a form approved by Lender, providing for subordination of those fees and such other provisions as Lender may require.  "Affiliate of Borrower" mea ns any corporation, partnership, joint venture, limited liability company, limited liability partnership, trust or individual controlled by, under common control with, or which controls Borrower (the term "control" for these purposes shall mean the ability, whether by the ownership of shares of other equity interests, by contract or otherwise, to elect a majority of the directors of a corporation, to make management decisions on behalf of, or independently to select the managing partner of, a partnership, or otherwise to have the power independently to remove and then select a majority of those individuals exercising managerial authority over an entity, and control shall be conclusively presumed in the case of the ownership of 50% or more of the equity interests).

18.

18. ENVIRONMENTAL HAZARDS.

(a)

(a) Except for matters covered by a written program of operations and maintenance approved in writing by Lender (an "O&M Program") or matters described in Section 18(b), Borrower shall not cause or permit any of the following:

(1)

the presence, use, generation, release, treatment, processing, storage (including storage in above ground and underground storage tanks), handling, or disposal of any Hazardous Materials on or under the Mortgaged Property or any other  property of Borrower that is adjacent to the Mortgaged Property;

(2)

the transportation of any Hazardous Materials to, from, or across the Mortgaged Property;

(3)

any occurrence or condition on the Mortgaged Property or any other property of Borrower that is adjacent to the Mortgaged Property, which occurrence or condition is or may be in violation of Hazardous Materials Laws; or

(4)

any violation of or noncompliance with the terms of any Environmental Permit with respect to the Mortgaged Property or any  property of Borrower that is adjacent to the Mortgaged Property.

The matters described in clauses (1) through (4) above are referred to collectively in this Section 18 as "Prohibited Activities or Conditions".

(b)

(b) Prohibited Activities and Conditions shall not include the safe and lawful use and storage of quantities of (1) pre-packaged supplies, cleaning materials and petroleum products customarily used in the operation and maintenance of comparable multifamily properties, (2) cleaning materials, personal grooming items and other items sold in pre-packaged containers for consumer use and used by tenants and occupants of residential dwelling units in the Mortgaged Property; and (3) petroleum products used in the operation and maintenance of motor vehicles from time to time located on the Mortgaged Property s parking areas, so long as all of the foregoing are used, stored, handled, transported and disposed of in compliance with Hazardous Materials Laws.

(c)

(c) Borrower shall take all commercially reasonable actions (including the inclusion of appropriate provisions in any Leases executed after the date of this Instrument) to prevent its employees, agents, and contractors, and all tenants and other occupants from causing or permitting any Prohibited Activities or Conditions.  Borrower shall not lease or allow the sublease or use of all or any portion of the Mortgaged Property to any tenant or subtenant for nonresidential use by any user that, in the ordinary course of its business, would cause or permit any Prohibited Activity or Condition.

(d)

(d) If an O&M Program has been established with respect to Hazardous Materials, Borrower shall comply in a timely manner with, and cause all employees, agents, and contractors of Borrower and any other persons present on the Mortgaged Property to comply with the O&M Program.  All costs of performance of Borrower's obligations under any O&M Program shall be paid by Borrower, and Lender's out-of-pocket costs incurred in connection with the monitoring and review of the O&M Program and Borrower's performance shall be paid by Borrower upon demand by Lender.  Any such out-of-pocket costs of Lender which Borrower fails to pay promptly shall become an additional part of the Indebtedness as provided in Section 12.

(e)

(e) Borrower represents and warrants to Lender that, except as previously disclosed by Borrower to Lender in writing:

(1)

Borrower has not at any time engaged in, caused or permitted any Prohibited Activities or Conditions;

(2)

to the best of Borrower's knowledge after reasonable and diligent inquiry, no Prohibited Activities or Conditions exist or have existed;

(3)

except to the extent previously disclosed by Borrower to Lender in writing, the Mortgaged Property does not now contain any underground storage tanks, and, to the best of Borrower s knowledge after reasonable and diligent inquiry, the Mortgaged Property has not contained any underground storage tanks in the past.  If there is an underground storage tank located on the Property which has been previously disclosed by Borrower to Lender in writing, that tank complies with all requirements of Hazardous Materials Laws;

(4)

Borrower has complied with all Hazardous Materials Laws, including all requirements for notification regarding releases of Hazardous Materials.  Without limiting the generality of the foregoing, Borrower has obtained all Environmental Permits required for the operation of the Mortgaged Property in accordance with Hazardous Materials Laws now in effect and all such Environmental Permits are in full force and effect;  

(5)

no event has occurred with respect to the Mortgaged Property that constitutes, or with the passing of time or the giving of notice would constitute, noncompliance with the terms of any Environmental Permit;

(6)

there are no actions, suits, claims or proceedings pending or, to the best of Borrower s knowledge after reasonable and diligent inquiry, threatened  that involve the Mortgaged Property and allege, arise out of, or relate to any Prohibited Activity or Condition; and

(7)

Borrower has not received any complaint, order, notice of violation or other communication from any Governmental Authority with regard to air emissions, water discharges, noise emissions or Hazardous Materials, or any other environmental, health or safety matters affecting the Mortgaged Property or any other property of Borrower that is adjacent to the Mortgaged Property.

The representations and warranties in this Section 18 shall be continuing representations and warranties that shall be deemed to be made by Borrower throughout the term of the loan evidenced by the Note, until the Indebtedness has been paid in full.

(f)

(f) Borrower shall promptly notify Lender in writing upon the occurrence of any of  the following events:

(1)

Borrower's discovery of any Prohibited Activity or Condition;

(2)

Borrower s receipt of or knowledge of any complaint, order, notice of violation or other communication from any Governmental Authority or other person with regard to present or future alleged Prohibited Activities or Conditions or any other environmental, health or safety matters affecting the Mortgaged Property or any other property of Borrower that is adjacent to the Mortgaged Property; and  

(3)

any representation or warranty in this Section 18 becomes untrue after the date of this Agreement.

Any such notice given by Borrower shall not relieve Borrower of, or result in a waiver of, any obligation under this Instrument, the Note, or any other Loan Document.

(g)

(g) Borrower shall pay promptly the costs of any environmental inspections, tests or audits ("Environmental Inspections") required by Lender in connection with any foreclosure or deed in lieu of foreclosure, or as a condition of Lender s consent to any Transfer under Section 21, or required by Lender following a reasonable determination by Lender that Prohibited Activities or Conditions may exist.  Any such costs incurred by Lender (including the fees and out-of-pocket costs of attorneys and technical consultants whether incurred in connection with any judicial or administrative process or otherwise) which Borrower fails to pay promptly shall become an additional part of the Indebtedness as provided in Section 12.  The results of all Environmental Inspections made by Lender shall at all times remain the property of Lender and Lender shall have no obligation to disclose or otherwise make available to Borrower or any other party such results or any other information obtaine d by Lender in connection with its Environmental Inspections.  Lender hereby reserves the right, and Borrower hereby expressly authorizes Lender, to make available to any party, including any prospective bidder at a foreclosure sale of the Mortgaged Property, the results of any Environmental Inspections made by Lender with respect to the Mortgaged Property.  Borrower consents to Lender notifying any party (either as part of a notice of sale or otherwise) of the results of any of Lender's Environmental Inspections.  Borrower acknowledges that Lender cannot control or otherwise assure the truthfulness or accuracy of the results of any of its Environmental Inspections and that the release of such results to prospective bidders at a foreclosure sale of the Mortgaged Property may have a material and adverse effect upon the amount which a party may bid at such sale.  Borrower agrees that Lender shall have no liability whatsoever as a result of delivering the results of any of its Environmental Inspections to any third party, and Borrower hereby releases and forever discharges Lender from any and all claims, damages, or causes of action, arising out of, connected with or incidental to the results of, the delivery of any of Lender's Environmental Inspections.

(h)

(h) If any investigation, site monitoring, containment, clean-up, restoration or other remedial work ("Remedial Work") is necessary to comply with any Hazardous Materials Law or order of any Governmental Authority that has or acquires jurisdiction over the Mortgaged Property  or the use, operation or improvement of the Mortgaged Property under any Hazardous Materials Law, Borrower shall, by the earlier of (1) the applicable deadline required by Hazardous Materials Law or (2) 30 days after notice from Lender demanding such action, begin performing the Remedial Work, and thereafter diligently prosecute it to completion, and shall in any event complete the work by the time required by applicable Hazardous Materials Law.  If Borrower fails to begin on a timely basis or diligently prosecute any required Remedial Work, Lender may, at its option, cause the Remedial Work to be completed, in which case Borrower shall reimburse Lender on demand for the cost of doing so.  Any reimburseme nt due from Borrower to Lender shall become part of the Indebtedness as provided in Section 12.

(i)

(i) Borrower shall cooperate with any inquiry by any Governmental Authority and shall comply with any governmental or judicial order which arises from any alleged Prohibited Activity or Condition.

(j)

(j) Borrower shall indemnify, hold harmless and defend (i) Lender, (ii) any prior owner or holder of the Note, (iii) the Loan Servicer, (iv) any prior Loan Servicer, (v) the officers, directors, shareholders, partners, employees and trustees of any of the foregoing, and (vi) the heirs, legal representatives, successors and assigns of each of the foregoing (collectively, the "Indemnitees") from and against all proceedings, claims, damages, penalties and costs (whether initiated or sought by Governmental Authorities or private parties), including fees and out-of-pocket expenses of attorneys and expert witnesses, investigatory fees, and remediation costs, whether incurred in connection with any judicial or administrative process or otherwise, arising directly or indirectly from any of the following:

(1)

any breach of any representation or warranty of Borrower in this Section 18;  

(2)

any failure by Borrower to perform any of its obligations under this Section 18;

(3)

the existence or alleged existence of any Prohibited Activity or Condition;

(4)

the presence or alleged presence of Hazardous Materials on or under the Mortgaged Property or any property of Borrower that is adjacent to the Mortgaged Property; and

(5)

the actual or alleged violation of any Hazardous Materials Law.  

(k)

(k) Counsel selected by Borrower to defend Indemnitees shall be subject to the  approval of those Indemnitees.  However, any Indemnitee may elect to defend any claim or legal or administrative proceeding at the Borrower’s expense.  

(l)

(l) Borrower shall not, without the prior written consent of those Indemnitees who are named as parties to a claim or legal or administrative proceeding (a "Claim"), settle or compromise the Claim if the settlement (1) results in the entry of any judgment that does not include as an unconditional term the delivery by the claimant or plaintiff to Lender of a written release of those Indemnitees, satisfactory in form and substance to Lender; or (2) may materially and adversely affect Lender, as determined by Lender in its discretion.

(m)

(m) Lender agrees that the indemnity under this Section 18 shall be limited to the assets of Borrower and Lender shall not seek to recover any deficiency from any natural persons who are general partners of Borrower.

(n)

(n) Borrower shall, at its own cost and expense, do all of the following:

(1)

pay or satisfy any judgment or decree that may be entered against any Indemnitee or Indemnitees in any legal or administrative proceeding incident to any matters against which Indemnitees are entitled to be indemnified under this Section 18;

(2)

reimburse Indemnitees for any expenses paid or incurred in connection with any matters against which Indemnitees are entitled to be indemnified under this Section 18; and

(3)

reimburse Indemnitees for any and all expenses, including fees and out-of-pocket expenses of attorneys and expert witnesses, paid or incurred in connection with the enforcement by Indemnitees of their rights under this Section 18, or in monitoring and participating in any legal or administrative proceeding.

(o)

(o) In any circumstances in which the indemnity under this Section 18 applies, Lender may employ its own legal counsel and consultants to prosecute, defend or negotiate any claim or legal or administrative proceeding and Lender, with the prior written consent of Borrower (which shall not be unreasonably withheld, delayed or conditioned), may settle or compromise any action or legal or administrative proceeding.  Borrower shall reimburse Lender upon demand for all costs and expenses incurred by Lender, including all costs of settlements entered into in good faith, and the fees and out-of-pocket expenses of such attorneys and consultants.

(p)

(p) The provisions of this Section 18 shall be in addition to any and all other obligations and liabilities that Borrower may have  under applicable law or under other Loan Documents, and each Indemnitee shall be entitled to indemnification under this Section 18 without regard to whether Lender or that Indemnitee has exercised any rights against the Mortgaged Property or any other security, pursued any rights against any guarantor, or pursued any other rights available under the Loan Documents or applicable law. If Borrower consists of more than one person or entity, the obligation of those persons or entities to indemnify the Indemnitees under this Section 18 shall be joint and several. The obligation of Borrower to indemnify the Indemnitees under this Section 18 shall survive any repayment or discharge of the Indebtedness, any foreclosure proceeding, any foreclosure sale, any delivery of any deed in lieu of foreclosure, and any release of record of the lien of this Instrument.

19.

19. PROPERTY AND LIABILITY INSURANCE.

(a)

(a) Borrower shall keep the Improvements insured at all times against such hazards as Lender may from time to time require, which insurance shall include but not be limited to coverage against loss by fire and allied perils, general boiler and machinery coverage, and business income coverage.  Lender’s insurance requirements may change from time to time throughout the term of the Indebtedness.  If Lender so requires, such insurance shall also include sinkhole insurance, mine subsidence insurance, earthquake insurance, and, if the Mortgaged Property does not conform to applicable zoning or land use laws, building ordinance or law coverage.  If any of the Improvements is located in an area identified by the Federal Emergency Management Agency (or any successor to that agency) as an area having special flood hazards, and if flood insurance is available in that area, Borrower shall insure such Improvements against loss by flood.

(b)

(b) All premiums on insurance policies required under Section 19(a) shall be paid in the manner provided in Section 7, unless Lender has designated in writing another method of payment.  All such policies shall also be in a form approved by Lender.  All policies of property damage insurance shall include a non-contributing, non-reporting mortgage clause in favor of, and in a form approved by, Lender.  Lender shall have the right to hold the original policies or duplicate original policies of all insurance required by Section 19(a).  Borrower shall promptly deliver to Lender a copy of all renewal and other notices received by Borrower with respect to the policies and all receipts for paid premiums.  At least 30 days prior to the expiration date of a policy, Borrower shall deliver to Lender the original  (or a duplicate original) of a renewal policy in form satisfactory to Lender.

(c)

(c) Borrower shall maintain at all times commercial general liability insurance, workers’ compensation insurance and such other liability, errors and omissions and fidelity insurance coverages as Lender may from time to time require.

(d)

(d) All insurance policies and renewals of insurance policies required by this Section 19 shall be in such amounts and for such periods as Lender may from time to time require, and shall be issued by insurance companies satisfactory to Lender.

(e)

(e) Borrower shall comply with all insurance requirements and shall not permit any condition to exist on the Mortgaged Property that would invalidate any part of any insurance coverage that this Instrument requires Borrower to maintain.

(f)

(f) In the event of loss, Borrower shall give immediate written notice to the insurance carrier and to Lender.  Borrower hereby authorizes and appoints Lender as attorney-in-fact for Borrower to make proof of loss, to adjust and compromise any claims under policies of property damage insurance, to appear in and prosecute any action arising from such property damage insurance policies, to collect and receive the proceeds of property damage insurance, and to deduct from such proceeds Lender’s expenses incurred in the collection of such proceeds.  This power of attorney is coupled with an interest and therefore is irrevocable.  However, nothing contained in this Section 19 shall require Lender to incur any expense or take any action.  Lender may, at Lender’s option, (1) hold the balance of such proceeds to be used to reimburse Borrower for the cost of restoring and repairing the Mortgaged Property to the equivalent of its original condition or to a condition approved by Lender (the "Restoration"), or (2) apply the balance of such proceeds to the payment of the Indebtedness, whether or not then due. To the extent Lender determines to apply insurance proceeds to Restoration, Lender shall do so in accordance with Lender’s then-current policies relating to the restoration of casualty damage on similar multifamily properties.

(g)

(g) Lender shall not exercise its option to apply insurance proceeds to the payment of the Indebtedness if all of the following conditions are met:  (1) no Event of Default (or any event which, with the giving of notice or the passage of time, or both, would constitute an Event of Default) has occurred and is continuing; (2) Lender determines, in its discretion, that there will be sufficient funds to complete the Restoration; (3) Lender determines, in its discretion, that the rental income from the Mortgaged Property after completion of the Restoration will be sufficient to meet all operating costs and other expenses, Imposition Deposits, deposits to reserves and loan repayment obligations relating to the Mortgaged Property; (4) Lender determines, in its discretion, that the Restoration will be completed before the earlier of (A) one year before the maturity date of the Note or (B) one year after the date of the loss or casualty; and (5) upon Lender's request, Borrower provides Lender evidence of the av ailability during and after the Restoration of the insurance required to be maintained by Borrower pursuant to this Section 19.

(h)

(h) If the Mortgaged Property is sold at a foreclosure sale or Lender acquires title to the Mortgaged Property, Lender shall automatically succeed to all rights of Borrower in and to any insurance policies and unearned insurance premiums and in and to the proceeds resulting from any damage to the Mortgaged Property prior to such sale or acquisition.

(i)

(i) Notwithstanding anything contained in this Deed of Trust to the contrary, in the event more than 80% (as determined by Lender) of the Property is destroyed by any means, the Loan secured by this Deed of Trust shall become immediately due and payable at Lender's option.  In the event Lender consents to rebuilding of the Property, rather than requiring acceleration of the Loan and Borrower is required to subject the Property to a condominium regime as a condition to approval by governmental agencies to such rebuilding, Lender shall not be required to grant partial releases of its security interests in connection with the sale of any condominium units within the Property.

20.

20. CONDEMNATION.

(a)

(a) Borrower shall promptly notify Lender of any action or proceeding relating to any condemnation or other taking, or conveyance in lieu thereof, of all or any part of the Mortgaged Property, whether direct or indirect (a "Condemnation").  Borrower shall appear in and prosecute or defend any action or proceeding relating to any Condemnation unless otherwise directed by Lender in writing.  Borrower authorizes and appoints Lender as attorney-in-fact for Borrower to commence, appear in and prosecute, in Lender’s or Borrower’s name, any action or proceeding relating to any Condemnation and to settle or compromise any claim in connection with any Condemnation.  This power of attorney is coupled with an interest and therefore is irrevocable.  However, nothing contained in this Section 20 shall require Lender to incur any expense or take any action.  Borrower hereby transfers and assigns to Lender all right, title and interest of Borrower in and to any award or payment with respect to (i) any Condemnation, or any conveyance in lieu of Condemnation, and (ii) any damage to the Mortgaged Property caused by governmental action that does not result in a Condemnation.

(b)

(b) Lender may apply such awards or proceeds, after the deduction of Lender’s expenses incurred in the collection of such amounts, at Lender’s option, to the restoration or repair of the Mortgaged Property or to the payment of the Indebtedness, with the balance, if any, to Borrower.  Unless Lender otherwise agrees in writing, any application of any awards or proceeds to the Indebtedness shall not extend or postpone the due date of any monthly installments referred to in the Note, Section 7 of this Instrument or any Collateral Agreement, or change the amount of such installments.  Borrower agrees to execute such further evidence of assignment of any awards or proceeds as Lender may require.

21.

21. TRANSFERS OF THE MORTGAGED PROPERTY OR INTERESTS IN BORROWER.

(a)

(a) The occurrence of any of the following events shall constitute an Event of Default under this Instrument:

(1)

a Transfer of all or any part of the Mortgaged Property or any interest in the Mortgaged Property;

(2)

a Transfer of a Controlling Interest in Borrower;

(3)

a Transfer of a Controlling Interest in any entity which owns, directly or indirectly through one or more intermediate entities, a Controlling Interest in Borrower;

(4)

a Transfer of all or any part of Key Principal's ownership interests (other than limited partnership interests) in Borrower, or in any other entity which owns, directly or indirectly through one or more intermediate entities, an ownership interest in Borrower;

(5)

if Key Principal is an entity, (A) a Transfer of a Controlling Interest in Key Principal, or (B) a Transfer of a Controlling Interest in any entity which owns, directly or indirectly through one or more intermediate entities, a Controlling Interest in Key Principal;

(6)

if Borrower or Key Principal is a trust, the termination or revocation of such trust; and

(7)

a conversion of Borrower from one type of legal entity into another type of legal entity, whether or not there is a Transfer.

Lender shall not be required to demonstrate any actual impairment of its security or any increased risk of default in order to exercise any of its remedies with respect to an Event of Default under this Section 21.

(b)

(b) The occurrence of any of the following events shall not constitute an Event of Default under this Instrument, notwithstanding any provision of Section 21(a) to the contrary:

(1)

a Transfer to which Lender has consented;

(2)

a Transfer that occurs by devise, descent, or by operation of law upon the death of a natural person;

(3)

the grant of a leasehold interest in an individual dwelling unit for a term of two years or less not containing an option to purchase;

(4)

a Transfer of obsolete or worn out Personalty or Fixtures that are contemporaneously replaced by items of equal or better function and quality, which are free of liens, encumbrances and security interests other than those created by the Loan Documents or consented to by Lender;

(5)

the grant of an easement, if before the grant Lender determines that the easement will not materially affect the operation or value of the Mortgaged Property or Lender's interest in the Mortgaged Property, and Borrower pays to Lender, upon demand, all costs and expenses incurred by Lender in connection with reviewing Borrower's request; and

(6)

the creation of a tax lien or a mechanic's, materialman's or judgment lien against the Mortgaged Property which is bonded off, released of record or otherwise remedied to Lender's satisfaction within 30 days of the date of creation.

(c)

(c) Lender shall consent, without any adjustment to the rate at which the Indebtedness secured by this Instrument bears interest or to any other economic terms of the Indebtedness, to a Transfer that would otherwise violate this Section 21 if, prior to the Transfer, Borrower has satisfied each of the following requirements:

(1)

the submission to Lender of all information required by Lender to make the determination required by this Section 21(c);

(2)

the absence of any Event of Default;

(3)

the transferee meets all of the eligibility, credit, management and other standards (including any standards with respect to previous relationships between Lender and the transferee and the organization of the transferee) customarily applied by Lender at the time of the proposed Transfer to the approval of borrowers in connection with the origination or purchase of similar mortgages, deeds of trust or deeds to secure debt on multifamily properties;

(4)

the Mortgaged Property, at the time of the proposed Transfer, meets all standards as to its physical condition that are customarily applied by Lender at the time of the proposed Transfer to the approval of properties in connection with the origination or purchase of similar mortgages on multifamily properties;

(5)

in the case of a Transfer of all or any part of the Mortgaged Property, or direct or indirect ownership interests in Borrower or Key Principal (if an entity), if transferor or any other person has obligations under any Loan Document, the execution by the transferee or one or more individuals or entities acceptable to Lender of an assumption agreement (including, if applicable, an Acknowledgement and Agreement of Key Principal to Personal Liability for Exceptions to Non-Recourse Liability) that is acceptable to Lender and that, among other things, requires the transferee or such individual or entity to perform all obligations of transferor or such person set forth in such Loan Document, and may require that the transferee comply with any provisions of this Instrument or any other Loan Document which previously may have been waived by Lender;

(6)

if a guaranty has been executed and delivered in connection with the Note, this Instrument or any of the other Loan Documents, the Borrower causes one or more individuals or entities acceptable to Lender to execute and deliver to Lender a guaranty in a form acceptable to Lender; and

(7)

Lender's receipt of all of the following:

(A)

a non-refundable review fee in the amount of $3,000 and a transfer fee equal to 1 percent of the outstanding Indebtedness immediately prior to the Transfer.

(B)

In addition, Borrower shall be required to reimburse Lender for all of Lender's out-of-pocket costs (including reasonable attorneys' fees) incurred in reviewing the Transfer request, to the extent such expenses exceed $3,000.

(d)

(d) For purposes of this Section, the following terms shall have the meanings set forth below:

(1)

"Initial Owners" means, with respect to Borrower or any other entity, the persons or entities who on the date of the Note own in the aggregate 100% of the ownership interests in Borrower or that entity.

(2)

A Transfer of a "Controlling Interest" shall mean, with respect to any entity, the following:

(i)

if such entity is a general partnership or a joint venture, a Transfer of any general partnership interest or joint venture interest which would cause the Initial Owners to own less than 51% of all general partnership or joint venture interests in such entity;

(ii)

if such entity is a limited partnership, a Transfer of any general partnership interest;

(iii)

if such entity is a limited liability company or a limited liability partnership, a Transfer of any membership or other ownership interest which would cause the Initial Owners to own less than 51% of all membership or other ownership interests in such entity;

(iv)

if such entity is a corporation (other than a Publicly-Held Corporation) with only one class of voting stock, a Transfer of any voting stock which would cause the Initial Owners to own less than 51% of voting stock in such corporation;

(v)

if such entity is a corporation (other than a Publicly-Held Corporation) with more than one class of voting stock, a Transfer of any voting stock which would cause the Initial Owners to own less than a sufficient number of shares of voting stock having the power to elect the majority of directors of such corporation; and

(vi)

if such entity is a trust, the removal, appointment or substitution of a trustee of such trust other than (A) in the case of a land trust, or (B) if the trustee of such trust after such removal, appointment or substitution is a trustee identified in the trust agreement approved by Lender.

(3)

"Publicly-Held Corporation" shall mean a corporation the outstanding voting stock of which is registered under Section 12(b) or 12(g) of the Securities and Exchange Act of 1934, as amended.

22.

22. EVENTS OF DEFAULT.  The occurrence of any one or more of the following shall constitute an Event of Default under this Instrument:

(a)

(a) any failure by Borrower to pay or deposit when due any amount required by the Note, this Instrument or any other Loan Document;

(b)

(b) any failure by Borrower to maintain the insurance coverage required by Section 19;

(c)

(c) any failure by Borrower to comply with the provisions of Section 33;

(d)

(d) fraud or material misrepresentation or material omission by Borrower, or any of its officers, directors, trustees, general partners or managers, Key Principal or any guarantor in connection with (A) the application for or creation of the Indebtedness, (B) any financial statement, rent roll, or other report or information provided to Lender during the term of the Indebtedness, or (C) any request for Lender's consent to any proposed action, including a request for disbursement of funds under any Collateral Agreement;

(e)

(e) any Event of Default under Section 21;

(f)

(f) the commencement of a forfeiture action or proceeding, whether civil or criminal, which, in Lender's reasonable judgment, could result in a forfeiture of the Mortgaged Property or otherwise materially impair the lien created by this Instrument or Lender's interest in the Mortgaged Property;

(g)

(g) any failure by Borrower to perform any of its obligations under this Instrument (other than those specified in Sections 22(a) through (f)), as and when required, which continues for a period of 30 days after notice of such failure by Lender to Borrower, but no such notice or grace period shall apply in the case of any such failure which could, in Lender's judgment, absent immediate exercise by Lender of a right or remedy under this Instrument, result in harm to Lender, impairment of the Note or this Instrument or any other security given under any other Loan Document;

(h)

(h) any failure by Borrower to perform any of its obligations as and when required under any Loan Document other than this Instrument which continues beyond the applicable cure period, if any, specified in that Loan Document; and

(i)

(i) any exercise by the holder of any other debt instrument secured by a mortgage, deed of trust or deed to secure debt on the Mortgaged Property of a right to declare all amounts due under that debt instrument immediately due and payable.

23.

23. REMEDIES CUMULATIVE.  Each right and remedy provided in this Instrument is distinct from all other rights or remedies under this Instrument or any other Loan Document or afforded by applicable law, and each shall be cumulative and may be exercised concurrently, independently, or successively, in any order.

24.

24. FORBEARANCE.

(a)

(a) Lender may (but shall not be obligated to) agree with Borrower, from time to time, and without giving notice to, or obtaining the consent of, or having any effect upon the obligations of, any guarantor or other third party obligor, to take any of the following actions:  extend the time for payment of all or any part of the Indebtedness; reduce the payments due under this Instrument, the Note, or any other Loan Document; release anyone liable for the payment of any amounts under this Instrument, the Note, or any other Loan Document; accept a renewal of the Note; modify the terms and time of payment of the Indebtedness; join in any extension or subordination agreement; release any Mortgaged Property; take or release other or additional security; modify the rate of interest or period of amortization of the Note or change the amount of the monthly installments payable under the Note; and otherwise modify this Instrument, the Note, or any other Loan Document.

(b)

(b) Any forbearance by Lender in exercising any right or remedy under the Note, this Instrument, or any other Loan Document or otherwise afforded by applicable law, shall not be a waiver of or preclude the exercise of any other right or remedy.  The acceptance by Lender of payment of all or any part of the Indebtedness after the due date of such payment, or in an amount which is less than the required payment, shall not be a waiver of Lender's right to require prompt payment when due of all other payments on account of the Indebtedness or to exercise any remedies for any failure to make prompt payment. Enforcement by Lender of any security for the Indebtedness shall not constitute an election by Lender of remedies so as to preclude the exercise of any other right available to Lender.  Lender's receipt of any awards or proceeds under Sections 19 and 20 shall not operate to cure or waive any Event of Default.

25.

25. LOAN CHARGES.  If any applicable law limiting the amount of interest or other charges permitted to be collected from Borrower is interpreted so that any charge provided for in any Loan Document, whether considered separately or together with other charges levied in connection with any other Loan Document, violates that law, and Borrower is entitled to the benefit of that law, that charge is hereby reduced to the extent necessary to eliminate that violation.  The amounts, if any, previously paid to Lender in excess of the permitted amounts shall be applied by Lender to reduce the principal of the Indebtedness.  For the purpose of determining whether any applicable law limiting the amount of interest or other charges permitted to be collected from Borrower has been violated, all Indebtedness which constitutes interest, as well as all other charges levied in connection with the Indebtedness which constitute interest, shall be deemed to be allocated and spread over the stated term of the N ote.  Unless otherwise required by applicable law, such allocation and spreading shall be effected in such a manner that the rate of interest so computed is uniform throughout the stated term of the Note.

26.

26. WAIVER OF STATUTE OF LIMITATIONS.  Borrower hereby waives the right to assert any statute of limitations as a bar to the enforcement of the lien of this Instrument or to any action brought to enforce any Loan Document.

27.

27. WAIVER OF MARSHALLING.  Notwithstanding the existence of any other security interests in the Mortgaged Property held by Lender or by any other party, Lender shall have the right to determine the order in which any or all of the Mortgaged Property shall be subjected to the remedies provided in this Instrument, the Note, any other Loan Document or applicable law.  Lender shall have the right to determine the order in which any or all portions of the Indebtedness are satisfied from the proceeds realized upon the exercise of such remedies.  Borrower and any party who now or in the future acquires a security interest in the Mortgaged Property and who has actual or constructive notice of this Instrument waives any and all right to require the marshalling of assets or to require that any of the Mortgaged Property be sold in the inverse order of alienation or that any of the Mortgaged Property be sold in parcels or as an entirety in connection with the exercise of any of the remedies permitted by applicable law or provided in this Instrument.

28.

28. FURTHER ASSURANCES.  Borrower shall execute, acknowledge, and deliver, at its sole cost and expense, all further acts, deeds, conveyances, assignments, estoppel certificates, financing statements, transfers and assurances as Lender may require from time to time in order to better assure, grant, and convey to Lender the rights intended to be granted, now or in the future, to Lender under this Instrument and the Loan Documents.

29.

29. ESTOPPEL CERTIFICATE.  Within 10 days after a request from Lender, Borrower shall deliver to Lender a written statement, signed and acknowledged by Borrower, certifying to Lender or any person designated by Lender, as of the date of such statement, (i) that the Loan Documents are unmodified and in full force and effect (or, if there have been modifications, that the Loan Documents are in full force and effect as modified and setting forth such modifications); (ii) the unpaid principal balance of the Note; (iii) the date to which interest under the Note has been paid; (iv) that Borrower is not in default in paying the Indebtedness or in performing or observing any of the covenants or agreements contained in this Instrument or any of the other Loan Documents (or, if the Borrower is in default, describing such default in reasonable detail); (v) whether or not there are then existing any setoffs or defenses known to Borrower against the enforcement of any right or remedy of Lender under the Loan Documents; and (vi) any additional facts requested by Lender.

30.

30. GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE.

(a)

(a) This Instrument, and any Loan Document which does not itself expressly identify the law that is to apply to it, shall be governed by the laws of the jurisdiction in which the Land is located (the "Property Jurisdiction").

(b)

(b) Borrower agrees that any controversy arising under or in relation to the Note, this Instrument, or any other Loan Document shall be litigated exclusively in the Property Jurisdiction.  The state and federal courts and authorities with jurisdiction in the Property Jurisdiction shall have exclusive jurisdiction over all controversies which shall arise under or in relation to the Note, any security for the Indebtedness, or any other Loan Document.  Borrower irrevocably consents to service, jurisdiction, and venue of such courts for any such litigation and waives any other venue to which it might be entitled by virtue of domicile, habitual residence or otherwise.

31.

31. NOTICE.

(a)

(a) All notices, demands and other communications ("notice") under or concerning this Instrument shall be in writing.  Each notice shall be addressed to the intended recipient at its address set forth in this Instrument, and shall be deemed given on the earliest to occur of (1) the date when the notice is received by the addressee; (2) the first Business Day after the notice is delivered to a recognized overnight courier service, with arrangements made for payment of charges for next Business Day delivery; or (3) the third Business Day after the notice is deposited in the United States mail with postage prepaid, certified mail, return receipt requested.  As used in this Section 31, the term "Business Day" means any day other than a Saturday, a Sunday or any other day on which Lender is not open for business.

(b)

(b) Any party to this Instrument may change the address to which notices intended for it are to be directed by means of notice given to the other party in accordance with this Section 31.  Each party agrees that it will not refuse or reject delivery of any notice given in accordance with this Section 31, that it will acknowledge, in writing, the receipt of any notice upon request by the other party and that any notice rejected or refused by it shall be deemed for purposes of this Section 31 to have been received by the rejecting party on the date so refused or rejected, as conclusively established by the records of the U.S. Postal Service or the courier service.

(c)

(c) Any notice under the Note and any other Loan Document which does not specify how notices are to be given shall be given in accordance with this Section 31.

32.

32. SALE OF NOTE; CHANGE IN SERVICER.  The Note or a partial interest in the Note (together with this Instrument and the other Loan Documents) may be sold one or more times without prior notice to Borrower.  A sale may result in a change of the Loan Servicer.  There also may be one or more changes of the Loan Servicer unrelated to a sale of the Note.  If there is a change of the Loan Servicer, Borrower will be given notice of the change.

33.

33. SINGLE ASSET BORROWER.  Until the Indebtedness is paid in full, Borrower (a) shall not acquire any real or personal property other than the Mortgaged Property and personal property related to the operation and maintenance of the Mortgaged Property;  (b) shall not operate any business other than the management and operation of the Mortgaged Property; and (c) shall not maintain its assets in a way difficult to segregate and identify.

34.

34. SUCCESSORS AND ASSIGNS BOUND.  This Instrument shall bind, and the rights granted by this Instrument shall inure to, the respective successors and assigns of Lender and Borrower.  However, a Transfer not permitted by Section 21 shall be an Event of Default.

35.

35. JOINT AND SEVERAL LIABILITY.  If more than one person or entity signs this Instrument as Borrower, the obligations of such persons and entities shall be joint and several.

36.

36. RELATIONSHIP OF PARTIES; NO THIRD PARTY BENEFICIARY.

(a)

(a) The relationship between Lender and Borrower shall be solely that of creditor and debtor, respectively, and nothing contained in this Instrument shall create any other relationship between Lender and Borrower.

(b)

(b) No creditor of any party to this Instrument and no other person shall be a third party beneficiary of this Instrument or any other Loan Document.  Without limiting the generality of the preceding sentence, (1) any arrangement (a "Servicing Arrangement") between the Lender and any Loan Servicer for loss sharing or interim advancement of funds shall constitute a contractual obligation of such Loan Servicer that is independent of the obligation of Borrower for the payment of the Indebtedness, (2) Borrower shall not be a third party beneficiary of any Servicing Arrangement, and (3) no payment by the Loan Servicer under any Servicing Arrangement will reduce the amount of the Indebtedness.

37.

37. SEVERABILITY; AMENDMENTS.  The invalidity or unenforceability of any provision of this Instrument shall not affect the validity or enforceability of any other provision, and all other provisions shall remain in full force and effect.  This Instrument contains the entire agreement among the parties as to the rights granted and the obligations assumed in this Instrument.  This Instrument may not be amended or modified except by a writing signed by the party against whom enforcement is sought.

38.

38. CONSTRUCTION.  The captions and headings of the sections of this Instrument are for convenience only and shall be disregarded in construing this Instrument.  Any reference in this Instrument to an "Exhibit" or a "Section" shall, unless otherwise explicitly provided, be construed as referring, respectively, to an Exhibit attached to this Instrument or to a Section of this Instrument.  All Exhibits attached to or referred to in this Instrument are incorporated by reference into this Instrument.  Any reference in this Instrument to a statute or regulation shall be construed as referring to that statute or regulation as amended from time to time.  Use of the singular in this Agreement includes the plural and use of the plural includes the singular.  As used in this Instrument, the term "including" means "including, but not limited to."

39.

39. LOAN SERVICING.  All actions regarding the servicing of the loan evidenced by the Note, including the collection of payments, the giving and receipt of notice, inspections of the Property, inspections of books and records, and the granting of consents and approvals, may be taken by the Loan Servicer unless Borrower receives notice to the contrary.  If Borrower receives conflicting notices regarding the identity of the Loan Servicer or any other subject, any such notice from Lender shall govern.

40.

40. DISCLOSURE OF INFORMATION.  Lender may furnish information regarding Borrower or the Mortgaged Property to third parties with an existing or prospective interest in the servicing, enforcement, evaluation, performance, purchase or securitization of the Indebtedness, including trustees, master servicers, special servicers, rating agencies, and organizations maintaining databases on the underwriting and performance of multifamily mortgage loans.  Borrower irrevocably waives any and all rights it may have under applicable law to prohibit such disclosure, including any right of privacy.

41.

41. NO CHANGE IN FACTS OR CIRCUMSTANCES.  All information in the application for the loan submitted to Lender (the "Loan Application") and in all financial statements, rent rolls, reports, certificates and other documents submitted in connection with the Loan Application are complete and accurate in all material respects.  There has been no material adverse change in any fact or circumstance that would make any such information incomplete or inaccurate.

42.

42. SUBROGATION.  If, and to the extent that, the proceeds of the loan evidenced by the Note are used to pay, satisfy or discharge any obligation of Borrower for the payment of money that is secured by a pre-existing mortgage, deed of trust or other lien encumbering the Mortgaged Property (a "Prior Lien"), such loan proceeds shall be deemed to have been advanced by Lender at Borrower's request, and Lender shall automatically, and without further action on its part, be subrogated to the rights, including lien priority, of the owner or holder of the obligation secured by the Prior Lien, whether or not the Prior Lien is released.

43.

43. ACCELERATION; REMEDIES.  At any time after the occurrence of an Event of Default, Lender, at Lender's option, may declare the Indebtedness to be immediately due and payable without further demand.  After giving Borrower notice of the occurrence of an Event of Default in the manner prescribed by Oregon law, Lender may invoke the power of sale and any other remedies permitted by Oregon law or provided in this Instrument or in any other Loan Document.  Borrower acknowledges that the power of sale granted by this Instrument may be exercised by Lender without prior judicial hearing.  Borrower has the right to bring an action to assert that an Event of Default does not exist or to raise any other defense Borrower may have to acceleration and sale.  Lender may also foreclosure this Instrument judicially as a mortgage.  Lender shall be entitled to collect all costs and expenses incurred in pursuing such remedies, including attorneys' fees and costs of documentary evidence, abstr acts and title reports

If Lender invokes the power of sale, Lender shall give written notice to Trustee of the occurrence of the Event of Default and of Lender's election to cause the Mortgaged Property to be sold.  Trustee and Lender shall give such notices as Oregon law may require to Borrower and to all other persons entitled to receive notice under Oregon law.  After the lapse of such time as may be required by Oregon law, Trustee shall sell the Mortgaged Property according to Oregon law.  Trustee may sell the Mortgaged Property at the time and place and under the terms designated in the notice of sale in one or more parcels and in such order as Trustee may determine.  Trustee may postpone the sale of all or any part of the Mortgaged Property for a period or periods not exceeding a total of 180 days by public announcement at the time and place fixed in the notice of sale.  Lender or Lender' s designee may purchase the Mortgaged Property at any sale.

Trustee shall deliver to the purchaser at the sale Trustee's deed conveying the Mortgaged Property so sold without any covenant or warranty, express or implied.  The recitals in the Trustee's deed shall be prima facie evidence of the truth of the statements made in those recitals.  Trustee shall apply the proceeds of the sale in the following order:  (a) to all costs and expenses of the sale, including Trustee's fees and attorneys' fees and costs of title evidence; (b) to the Indebtedness in such order as Lender, in Lender's discretion, directs; and (c) the excess, if any, to the person or persons legally entitled to the excess.

44.

44. RECONVEYANCE.  Upon payment of the Indebtedness, Lender shall request Trustee to reconvey the Mortgaged Property and shall surrender this Instrument and the Note to Trustee.  Trustee shall reconvey the Mortgaged Property without warranty to the person or persons legally entitled thereto.  Such person or persons shall pay Trustee’s reasonable costs incurred in so reconveying the Mortgaged Property and costs of recording, if any.

45.

45. SUBSTITUTE TRUSTEE.  In accordance with Oregon law, Lender may from time to time appoint a successor trustee to any Trustee appointed under this Instrument who has ceased to act.  Without conveyance of the Mortgaged Property, the successor trustee shall succeed to all the title, power and duties conferred upon the predecessor Trustee and by Oregon law.

46.

46. USE OF MORTGAGED PROPERTY.  The Mortgaged Property is not used for agricultural, timber or grazing purposes.

47.

47. ATTORNEYS’ FEES.  As used in this Instrument and in the Note, “attorneys’ fees” shall include attorneys’ fees, if any, which shall be incurred whether or not legal action is commenced and any such fees incurred at trial, arbitration, interpleader, bankruptcy, hearing or any judicial proceeding, and on appeal.

48.

48. TIME OF ESSENCE.  Time is of the essence of each covenant of this Instrument.

49.

49. FORCED PLACEMENT OF INSURANCE NOTICE.  WARNING:  UNLESS YOU PROVIDE US WITH EVIDENCE OF THE INSURANCE COVERAGE AS REQUIRED BY OUR CONTRACT OR LOAN AGREEMENT, WE MAY PURCHASE INSURANCE AT YOUR EXPENSE TO PROTECT OUR INTEREST.  THIS INSURANCE MAY, BUT NEED NOT, ALSO PROTECT YOUR INTEREST.  IF THE COLLATERAL BECOMES DAMAGED, THE COVERAGE WE PURCHASE MAY NOT PAY ANY CLAIM YOU MAKE OR ANY CLAIM MADE AGAINST YOU.  YOU MAY LATER CANCEL THIS COVERAGE BY PROVIDING EVIDENCE THAT YOU HAVE OBTAINED PROPERTY COVERAGE ELSEWHERE.

YOU ARE RESPONSIBLE FOR THE COST OF ANY INSURANCE PURCHASED BY US.  THE COST OF THIS INSURANCE MAY BE ADDED TO YOUR CONTRACT OR LOAN BALANCE.  IF THIS COST IS ADDED TO YOUR CONTRACT OR LOAN BALANCE, THE INTEREST RATE PAYABLE UNDER THE UNDERLYING LOAN WILL APPLY TO THIS ADDED COST.  THE EFFECTIVE DATE OF THE COVERAGE MAY BE THE DATE YOUR PRIOR COVERAGE LAPSED OR THE DATE YOU FAILED TO PROVIDE PROOF OF COVERAGE.

THE COVERAGE WE PURCHASE MAY BE CONSIDERABLY MORE EXPENSIVE THAN INSURANCE YOU CAN OBTAIN ON YOUR OWN AND MAY NOT SATISFY ANY NEED FOR PROPERTY DAMAGE COVERAGE OR ANY MANDATORY LIABILITY INSURANCE REQUIREMENTS IMPOSED BY APPLICABLE LAW.  (Each reference to "you" or "your" shall refer to Borrower and each reference to "us" and "we" shall refer to Lender.)

50.

50. NO ORAL COMMITMENTS NOTICE.  UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY LENDER AFTER OCTOBER 3, 1989, CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY BORROWER'S RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY LENDER TO BE ENFORCEABLE.

51.

51. WAIVER OF TRIAL BY JURY.  BORROWER AND LENDER EACH (A) COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS INSTRUMENT OR THE RELATIONSHIP BETWEEN THE PARTIES AS BORROWER AND LENDER THAT IS TRIABLE OF RIGHT BY A JURY AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO SUCH ISSUE TO THE EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN THE FUTURE.  THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL.

ATTACHED EXHIBITS.  The following Exhibits are attached to this Instrument:

X	Exhibit A	Description of the Land (required)
X	Exhibit B	Modifications to Instrument

IN WITNESS WHEREOF, Borrower has signed and delivered this Instrument or has caused this Instrument to be signed and delivered by its duly authorized representative.

VMS NATIONAL PROPERTIES, an Illinois joint venture general partnership

By:  VMS National Residential Portfolio I, an Illinois limited partnership, its joint venture partner

By:  Maeril, Inc., a Delaware corporation, its general partner

By:   /s/Patti K. Fielding

Patti K. Fielding

Executive Vice President and Treasurer

By:  VMS National Residential Portfolio II, an Illinois limited partnership, its joint venture partner

By:  Maeril, Inc., a Delaware corporation, its general partner

By:  /s/Patti K. Fielding

Patti K. Fielding

Executive Vice President and Treasurer

EXHIBIT A

[DESCRIPTION OF THE LAND]

EXHIBIT B

Modifications to Security Instrument

The following modifications are made to the text of the Instrument that precedes this Exhibit:

1.

Paragraph 7 is amended to add the following subparagraph:

(f)

Notwithstanding the provisions of Subparagraph 7(a), Lender will not require Borrower to deposit with Lender amounts sufficient to accumulate with Lender the entire sum required to pay Taxes, provided that Borrower delivers to Lender a letter of credit and opinion of the letter of credit issuer’s counsel, both in form and content satisfactory to Lender in its sole discretion, in an amount equal to one (1) year’s Taxes.  In the event that Borrower does not timely pay Taxes or fails to provide Lender with proof of such payment, Lender shall have the right to (i) cash the letter of credit and apply the proceeds of the same to the payment of Taxes, (ii) deposit any proceeds in excess of the amount of Taxes then due and payable into Lender’s account for Imposition Deposits and (iii) require Borrower to deposit with Lender Imposition Deposits as provided in Subpar agraph 7(a).

2.

Paragraph 18(a) is amended to add the following sections:

(5)

the presence of any form of toxic mold or fungus in the Mortgaged Property of a type which may pose a significant risk to human health or the environment or would negatively impact the value of the Mortgaged Property (collectively “Mold”);

(6)

any activity, condition, event or omission that causes the growth of Mold on or in the Mortgaged Property.

3.

The defined term “Prohibited Activities or Conditions” is amended to include the matters described in Sections 18(a)(5) and 18(a)(6).

4.

A new Section 21(a)(8) is added as follows:

(8)

if, at any time, AIMCO REIT loses the authority or the ownership interests necessary to control, either directly or indirectly, Borrower and Guarantor and Borrower’s and Grantor’s Controlling Entities (“AIMCO Authorization”), Grantor covenants to send notice of such loss of AIMCO Authorization to Lender within fifteen (15) business days.  Such loss of AIMCO Authorization, shall be deemed a Transfer hereunder, and such Transfer shall constitute an Event of Default under Section 21(a) unless AIMCO REIT regains such AIMCO Authorization within sixty (60) days after the date of the loss.

5.

Section 33 is amended by adding the following sentences at the end of such Section:

“Borrower has disclosed to and provided Lender with information relating to assets it currently owns in addition to the Mortgaged Property (the “Disclosed Assets”).  Lender acknowledges that Borrower is not a single asset entity and agrees that Borrower may continue to own and operate the Disclosed Assets until September 30, 2007.  Until the Indebtedness is paid in full, Borrower (a) shall not acquire any real or personal property other than (i) the Mortgaged Property, (ii) the Disclosed Assets, (iii) personal property related to the operation and maintenance of the Mortgaged Property and the Disclosed Assets, and (iv) personal property and residences used primarily for the personal use of the Borrower and their family; (b) shall not operate any business other

than the management and operation of the Mortgaged Property and the Disclosed Assets; (c) shall not maintain its assets in a way which is difficult to segregate and identify and (d) grant, create or permit the existence of any new or additional mortgage, deed of trust, deed to secure debt or other lien encumbrance on any of the Disclosed Assets, the Mortgaged Property or ownership interest in the Borrower, whether voluntary, involuntary or by operation of law.  In the event the Property shall be transferred, the single asset requirements of the original Section 33 of this Instrument shall apply for any transferee.”

6.

The following new Section is added at the end of the Instrument after the last numbered Section, but there are no Sections between the last numbered Section and Section 55:

“55.  CONVEYANCE.

No later than September 30, 2007, Borrower shall convey all of its interest in the Mortgaged Property (the “Conveyance”) to a Lender-approved, single-asset, single purpose entity.  Failure to complete the Conveyance shall constitute an event of default under Section 22 of the Security Instrument.

The documents evidencing the Conveyance shall be submitted to Lender for review prior to the Conveyance, and shall be in form and substance satisfactory to Lender.  Borrower agrees to pay all costs incurred in connection with the Conveyance; including, without limitation, the legal fees, if any, of Lender’s attorneys in connection with the required review and approval and the endorsement to the Lender’s title insurance policy.

Completion of the Conveyance shall be evidenced by submission to Lender of the recorded conveyance documents and an endorsement to the Lender’s title insurance policy.

It is understood that no transfer or application fee shall be due in connection with the Conveyance, and that the Conveyance shall not be deemed to violate Section 21 of the Security Instrument respecting Transfers.”

7.

AIMCO STANDARD.

A.

Section 1(v) is modified to read as follows:

(v)

"Personalty" means all furniture, furnishings, equipment, machinery, building materials, appliances, goods, supplies, tools, books, records (whether in written or electronic form), computer equipment (hardware and software) and other tangible personal property (other than Fixtures) which are used now or in the future exclusively in connection with the ownership, management or operation of the Land or the Improvements or are located on the Land or in the Improvements, and any operating agreements relating to the Land or the Improvements, and any surveys, plans and specifications and contracts for architectural, engineering and construction services relating to the Land or the Improvements and all other intangible property and rights exclusively relating to the operation of, or used exclusively in connection with, the Land or the Improvements including all governmental permits relating to any activities on the Land.

B.

Section 7(c) is modified to read as follows:

(c)

Notwithstanding the provisions of  Section 7(a), Lender will not require Borrower to deposit with Lender amounts sufficient to accumulate with Lender the entire sum required to pay the water and sewer charges, fire, hazard or other insurance premiums, and ground rents.  At least annually, Borrower must provide Lender with proof of payment of all such Impositions for which Lender is not collecting Imposition Deposits.  In the event that Borrower does not timely pay any of the Impositions, or fails to provide Lender with proof of such payment, or upon the occurrence of an Event of Default hereunder, or upon Borrower’s failure to maintain the Mortgaged Property in a satisfactory manner in accordance with the requirements of this Instrument, then in any such events, Lender may require Borrower to deposit with Lender the Imposition Deposits as provided in Section 7(a).

C.

Except in a case where Lender in its discretion determines that an emergency exists, Lender may take actions specified in Section 12(a) only if Lender has notified Borrower of Borrower's failure to perform any of its obligations under this Instrument or any other Loan Document and Borrower does not cure the failure within ten (10) days after such notice.  If Lender so determines that an emergency exists, Lender shall notify Borrower of the action taken within ten (10) days after the action is taken.

D.

Sections 14(b)(4) and 14(b)(5) are modified to read as follows:

(4)

within 120 days after the end of each fiscal year of Borrower, and at any other time upon Lender's request, a statement that identifies all owners of any interest in Borrower and each general partner in Borrower, and confirming that the ownership of each other Controlling Entity has not changed in a manner that violates Section 21(a);

(5)

promptly following Lender's request, quarterly or monthly income and expense statements for the Property relating to a quarterly or monthly period, as the case may be, ending no later than 45 days before the request;

E.

For purposes of Section 14(b), Borrower shall be deemed to have delivered any statement or document "upon Lender's request" if Borrower has delivered the document promptly following Lender's request.

F.

Notwithstanding Section (14)(c), unless an Event of Default has occurred and is continuing, or Lender has determined that an event having a Material Adverse Effect has occurred, Lender may require that the financial statements required by Sections 14(b)(1), 14(b)(2) and 14(b)(3) be audited, but may not require that any other financial statements required by Section 14 be audited.  Certification of a statement by the chief financial officer of the entity that is the subject of the statement or, in the case of a partnership, the chief financial officer of the general partner, will be acceptable to Lender as certification by an individual having authority to bind Borrower.

G.

Lender shall not have Borrower's books and records audited pursuant to Section 14(d) unless Lender has given Borrower notice specifying the statements, schedules and reports required by Section 14(b) that Borrower has failed to provide, and Borrower has not provided such statements by the expiration of ten days after such notice.

H.

So long as Borrower is contesting the amount and validity of any Imposition other than insurance premiums diligently and in good faith as described in Section 15(d) and all of the conditions specified in clauses (1) through (4) of Section 15(d) are satisfied, Lender will refrain from applying Imposition Deposits to payment of the contested Imposition.

I.

Section 15(e) and Section 16 are modified to read as follows:

15(e)

Borrower shall promptly deliver to Lender a copy of all notices of, and invoices for Impositions, and if Borrower pays any Imposition directly (which Borrower has no obligation to do unless Imposition Deposits have been waived or are insufficient and Lender has notified Borrower of that insufficiency), Borrower shall promptly furnish to Lender receipts evidencing such payments.

16.

LIENS; ENCUMBRANCES.  Borrower acknowledges that, to the extent provided in Section 21, the grant, creation or existence of any mortgage, deed of trust, deed to secure debt, security interest or other lien or encumbrance (a “Lien”) on the Mortgaged Property (other than the lien of this Instrument), or on certain ownership interests in Borrower, whether voluntary, involuntary or by operation of law, and whether or not such lien has priority over the lien of this Instrument, is a “Transfer” which constitutes an Event of Default.

J.

For purposes of Section 18(b), "pre-packaged supplies, cleaning materials and petroleum products customarily used in the operation and maintenance of comparable multifamily properties" shall include, without limitation, pool, spa, maintenance and gardening materials.

K.

The second sentence of Section 18(c) is modified to read as follows:

Borrower shall not lease or allow the sublease or use of all or any portion of the Mortgaged Property to any tenant or subtenant for nonresidential use by any user that, in the ordinary course of its business, would be reasonably expected to cause or permit any Prohibited Activity or Condition.

L.

For purposes of Section 18(d), Borrower shall only be obligated to pay out-of-pocket expenses incurred by Lender in connection with the monitoring and review of an O&M Program and Borrower's performance to the extent such expenses are reasonable.

M.

Borrower's representation and warranty in Section 18(e)(4) regarding requirements for notification regarding releases of Hazardous Materials shall relate only to such releases, if any, at or affecting the Mortgaged Property.

N.

Section 18(e)(5) is modified to read as follows:

(5)

no event has occurred with respect to the Mortgaged Property that constitutes, or with the passing of time or the giving of notice would reasonably be expected to constitute, noncompliance with the terms of any Environmental Permit;

O.

Section 18(g) is modified to read as follows:

(g)

Borrower shall pay promptly the costs of any environmental inspections, tests or audits ("Environmental Inspections") required by Lender in connection with or in preparation for any foreclosure or deed in lieu of foreclosure.  Borrower shall also pay promptly the reasonable costs of any Environmental Inspections required by Lender in connection with, or as a condition of Lender's consent to any Transfer under Section 21, or required by Lender following a reasonable determination by Lender that Prohibited Activities or Conditions may exist.  Any such costs incurred by Lender (including the fees and out-of-pocket costs of attorneys and technical consultants whether incurred in connection with any judicial or administrative process or otherwise) which Borrower fails to pay promptly shall become an additional part of the Indebte dness as provided in Section 12. The results of all Environmental Inspections made by Lender in connection with or in preparation for any foreclosure or deed in lieu of foreclosure shall at all times remain the property of Lender and Lender shall have no obligation to disclose such results to or otherwise make such results available to Borrower or any other party.  Lender will make available to Borrower the results of all other Environmental Inspections made by Lender.  Lender hereby reserves the right, and Borrower hereby expressly authorizes Lender, to make available to any party, including any prospective bidder at a foreclosure sale of the Mortgaged Property, the results of any Environmental Inspections made by Lender with respect to the Mortgaged Property.  Borrower consents to Lender notifying any party (either as part of a notice of sale or otherwise) of the results of any of Lender's Environmental Inspections.  Except in the case of an Environmental Inspection performed in connect ion with a foreclosure or deed in lieu of foreclosure, or a disclosure of Environmental Inspection results that Lender is required by law to make, Lender shall notify Borrower of its intention to disclose such information and shall give Borrower ten days to provide supplemental information, explanations or corrections to accompany the disclosure. Borrower acknowledges that Lender cannot control or otherwise assure the truthfulness or accuracy of the results of any of its Environmental Inspections and that the release of such results to prospective bidders at a foreclosure sale of the Mortgaged Property may have a material and adverse effect upon the amount which a party may bid at such sale.  Borrower agrees that Lender shall have no liability whatsoever as a result of delivering the results of any of its Environmental Inspections to any third party, and Borrower hereby releases and forever discharges Lender from any and all claims, damages, or causes of

action, arising, out of, connected with or incidental to the results of, the delivery of any of Lender's Environmental Inspections.

P.

Lender shall not commence Remedial Work under the second sentence of Section 18(h) unless Lender has given Borrower notice of its intention to do so and Borrower has not begun performing the Remedial Work within 10 days after such notice.

Q.

The following sentence is added at the end of Section 18(j):

However, Borrower shall have no obligation to indemnify any of the foregoing parties to the extent that the proceedings, claims, damages, penalties or costs arise out of the gross negligence or willful misconduct of Lender, any prior owner or holder of the Note, the Loan Servicer or any prior Loan Servicer.

R.

For purposes of Section 19(b), Lender will accept a duplicate original of any insurance policy.

S.

For purposes of Section 19(d), an insurance company will be acceptable to Lender if it has a rating in Best's Key Rating Guide of at least "A-" and a financial size category of at least “v,” provided that if Fannie Mae changes its requirements for the financial rating of insurers generally, Lender may change the requirement set forth in this sentence in a manner consistent with any such change.

T.

Clause (2) of Section 19(g) is modified to read as follows:

(2)

Lender determines, in its discretion, that the combination of insurance proceeds and amounts provided by the Borrower will be sufficient to complete the Restoration.

U.

For purposes of Section 19(h), Lender shall automatically succeed to rights of Borrower in and to insurance policies and unearned premiums only to the extent permitted by the applicable policies and insurance companies.

V.

Section 21(a)(2) is modified to read as follows:

(2)

if Borrower is a joint venture general partnership, a Transfer of (A) any general partnership interest (except for a Transfer to a Qualified REIT Subsidiary, as defined in Section 856(i)(2) of the Internal Revenue Code of 1986, 100% owned by Apartment Investment and Management Company, a Maryland corporation or to a Qualified REIT Subsidiary, as defined in Section 856 (l)(1) of the Internal Revenue Code of 1986, 100% owned by AIMCO OP), or (B) other interests in Borrower that would cause the Initial Owners of Borrower to own less than 51% of all partnership interests in Borrower;

W.

New Sections 21(b)(7), 21(b)(8), 21(b)(9), and 21(b)(10) are added, as follows:

(7)

The Transfer of any joint venture partnership interests in Borrower provided no Change of Control occurs as a result of such Transfer.

(8)

The Transfer of shares of common stock, limited partnership interests or other beneficial or ownership interests or other forms of securities in AIMCO REIT or AIMCO OP, and the issuance of all varieties of convertible debt, equity and other similar securities of AIMCO REIT or AIMCO OP, and the subsequent Transfer of such securities; provided, however, that no Change of Control occurs as a result of such Transfer, either upon such Transfer or upon the subsequent conversion to equity of such convertible debt or other securities.

(9)

The issuance by AIMCO REIT or AIMCO OP of additional common stock, limited partnership interests or other beneficial or ownership interests, convertible debt, equity and other similar securities, and the subsequent Transfer of such convertible debt or securities; provided, however, that no Change of Control occurs as the result of such Transfer, either upon such Transfer or upon the subsequent conversion to equity of such convertible debt or other securities.

(10)

So long as AIMCO REIT owns 100% of the stock of AIMCO-LP, Inc., a Transfer of limited partnership interests that results in AIMCO-LP, Inc. owning not less than 50.1% of the limited partnership interests in AIMCO OP.

X.

Section 21(b)(8) shall apply only to a Transfer of an interest in a Controlling Entity that is prohibited by Section 21(a)(7).

Y.

A new Section 21(d) is added, as follows:

(d)

For purposes of this Section 21, the following terms shall be defined as follows:

(1)

"Change of Control" shall mean the earliest to occur of (A) the date an Acquiring Person becomes (by acquisition, consolidation, merger or otherwise), directly or indirectly, the beneficial owner of more than forty percent (40%) of the total Voting Equity Capital of AIMCO REIT then outstanding, or (B) the date on which AIMCO REIT shall cease to hold (whether directly or indirectly through a wholly owned intermediary entity such as AIMCO-LP, Inc. or AIMCO-GP, Inc.) at least 50.1% of the limited partnership interests in AIMCO OP, or (C) the date on which AIMCO REIT shall cease for any reason to hold (whether directly or indirectly) (i) the interests in the Joint Venture Partners held as of the date of this Instrument (as evidenced by organizational charts and documents submitted to Lender as of such date) and (ii) the Controlling Interest(s) in the Borrower, or (D) t he replacement (other than solely by reason of retirement at age sixty-five or older, death or disability) of more than 50% (or such lesser percentage as is required for

decisionmaking by the board of directors of trustees, if applicable) of the members of the board of directors (or trustee, if applicable) of AIMCO REIT over a one-year period where such replacement shall not have been approved by a vote of at least a majority of the board of directors (or trustees, if applicable) of AIMCO REIT then still in office who either were members of such board of directors (or trustees, if applicable) at the beginning of such one year period or whose election as members of the board of directors (or trustees, if applicable) was previously so approved.

(2)

"Acquiring Person" shall mean a "person" or group of "persons" within the meaning of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended.  However, notwithstanding the foregoing, “Acquiring Person” shall not be deemed to include any member of the Borrower Control Group unless such member has, directly or indirectly, disposed of, sold or otherwise transferred to, or encumbered or restricted (whether by means of voting trust agreement or otherwise) for the benefit of an Acquiring Person, all or any portion of the Voting Equity Capital of AIMCO REIT directly or indirectly owned or controlled by such member or such member directly or indirectly votes all or any portion of the Voting Equity Capital of AIMCO REIT, directly or indirectly, owned or controlled by such member for the taking of any action which, direc tly or indirectly constitutes or would result in a Change of Control, in which event such member of the Borrower Control Group shall be deemed to constitute an Acquiring Person to the extent of the Voting Equity Capital of AIMCO REIT owned or controlled by such member.

(3)

"Borrower Control Group" shall mean Terry Considine, Peter K. Kompaniez, Richard S. Ellwood, J. Landis Martin, Thomas L. Rhodes and James N. Bailey.

(4)

A "Person" shall mean an individual, an estate, a trust, a corporation, a partnership, a limited liability company or any other organization or entity (whether governmental or private).

(5)

"Security" shall have the same meaning as in Section 2(1) of the Securities Act of 1933, as amended.

(6)

"Controlling Interest(s)" shall mean (i) with respect to a partnership, such majority and/or managing general partner interests which, together with a majority of limited partnership interests if necessary

for consent purposes, vest in the holder of such interests the sole power, right and authority to control the day to day operations of the Borrower; including, without limitation, the authority to manage, operate and finance the Mortgaged Property, (ii) with respect to a corporation, the number of shares which entitle the holder to elect a majority of the board of directors of the Borrower, and (iii) with respect to a limited liability company, such majority and/or managing member interests as vest in the holder of such interests the sole power, right and authority to control the day to day operations of the Borrower; including, without limitation, the authority to manage, operate and finance the Mortgaged Property.

(7)

"AIMCO REIT" shall mean Apartment Investment and Management Company, a corporation organized and existing under the laws of the State of Maryland.

(8)

"AIMCO OP" shall mean AIMCO Properties, L.P., a limited partnership organized and existing under the laws of the State of Delaware.

(9)

"Joint Venture Partners" shall mean the entities executing this Instrument on behalf of the Borrower and/or its successors or assigns in interest.

(10)

“Voting Equity Capital” shall mean Securities of any class or classes, the holders of which are ordinarily, in the absence of contingencies, entitled to elect a majority of the board of directors (or Persons performing similar functions).

V.

Section 22(a) is modified to read as follows:

(a)

any failure by Borrower to pay or deposit (i) any Imposition Deposit within three days after it is due, or (ii) any other amount required by the Note, this Instrument, or any other Loan Document when due.

W.

Section 28 shall obligate Borrower to provide such further assurances as Lender reasonably may require.

X.

The words "Except as otherwise disclosed to Lender in writing, before the date of this Instrument" are added at the beginning of the second sentence of Section 41.

Y.

Section 37 is modified by adding: “; provided, however, that in the event of a Transfer, any or some or all of the Modifications to Instrument set forth in Exhibit B (if any) may be modified or rendered void by Lender at Lender’s option by notice to Borrower/transferee”.  The modifications set forth in this Exhibit B shall be null and void unless title to the Mortgaged Property is vested in an entity whose Controlling Interest(s) are directly or indirectly held by AIMCO REIT or AIMCO OP.

INITIALS

EX-10

EXHIBIT 10.41

The Bluffs Apartments

MULTIFAMILY NOTE

(VARIABLE LOAN)

US $4,530,257.00

As of January 18, 2007

FOR VALUE RECEIVED, the undersigned (“Borrower”) promises to pay to the order of CAPMARK FINANCE INC., a California corporation, the principal sum of Four Million Five Hundred Thirty Thousand Two Hundred Fifty-Seven and 00/100 Dollars (US $4,530,257.00), with interest on each Variable Loan at an annual rate as calculated in Section 3 hereof.

This Note is executed and delivered by Borrower pursuant to one of either (i) that certain Amended and Restated Loan Agreement, dated as of September 16, 2002, by and among certain borrowers signatory thereto and Lender or (ii) that certain Loan Agreement dated as of November 1, 2002, by and among certain borrowers signatory thereto and Lender.  As used herein, the term “Loan Agreement” shall mean whichever of the loan agreements described in the preceding sentence shall apply from time to time in accordance with their respective terms, along with all amendments, supplements, replacements, restatements or other modifications thereto or thereof from time to time made.  The Loan Agreement shall evidence the obligation of Borrower to repay a Variable Loan made by Lender to Borrower in accordance with the terms of the Loan Agreement.  This Note is entitled to the benef it and security of the Loan Documents provided for in the Loan Agreement, to which reference is hereby made for a statement of all of the terms and conditions under which the Variable Loan evidenced hereby is made.  The Loan Agreement requires certain of the terms of each Variable Loan to be evidenced by one or a series of Loan Confirmation Instruments, and reference is hereby made to each such Loan Confirmation Instrument for such terms.

1.

Defined Terms.  As used in this Note, (i) the term “Lender” means the holder of this Note, and (ii) the term “Indebtedness” means the principal of, interest on, or any other amounts due at any time under, this Note, the Security Instrument or any other Loan Document, including prepayment premiums, late charges, default interest, and advances to protect the security of the Security Instrument under Section 12 of the Security Instrument.  Event of Default and other capitalized terms used but not defined in this Note shall have the meanings given to such terms in the Loan Agreement or, if not defined in the Loan Agreement, as defined in the Security Instrument (as defined in Paragraph 5).

2.

Address for Payment.  All payments due under this Note shall be payable at Capmark Finance Inc., 116 Welsh Road, Horsham, PA  19044 , Attention:  Servicing – Account Manager, or such other place as may be designated by written notice to Borrower from or on behalf of Lender.

3.

Payment of Principal and Interest.  Principal and interest shall be paid as follows:

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(a)

This Note shall evidence a Variable Loan made from time to time under the Loan Agreement.  The Variable Loan shall bear interest at a rate determined in accordance with Section 2.01 of the Loan Agreement.

(b)

Borrower shall pay imputed interest on each Variable Loan in advance in the form of a Discount in accordance with Section 1.04(b) of the Loan Agreement (except that Borrower shall pay actual interest on the Variable Loan for the partial month period, if any, in accordance with Section 1.04(a) of the Loan Agreement).  

(c)

Borrower shall make monthly payments of principal each in the amount as set forth on the attached Amortization Schedule.  Lender shall apply each such principal payment to the outstanding principal amount of the Loan on the Rollover Date next following receipt of any such payment.  If not sooner paid, the entire principal amount of the Variable Loan shall be due and payable on the earlier of (i) the termination of the Loan Agreement pursuant to subsection (e) of Section 1.02 thereof, (ii) the fifth anniversary (unless such date is extended pursuant to Section 1.07 of the Loan Agreement, in which case, the tenth anniversary) of the Initial Closing Date or (iii) the maturity date of any outstanding MBS, unless either (A) not less than five Business Days prior to the maturity date of the outstanding MBS, a Borrower has requested that the outstanding MBS be renewed wi th a new MBS or converted to a Fixed Loan to take effect on the maturity date of the outstanding MBS and such new MBS has been issued or conversion has occurred or (B) the MBS is automatically renewed, which automatic renewal shall occur in the event that a Borrower does not make the request set forth in subpart (iii)(A) above and does not give Lender notice not less than five Business days prior to the maturity date of the outstanding MBS that the Variable Loan related to such outstanding MBS shall be paid on the maturity date of such outstanding MBS (the “Maturity Date”).  Any MBS that is issued as a result of an automatic renewal of a maturing MBS as contemplated by subpart (iii)(B) above shall have a maturity date of three (3) months after the MBS Issue Date.  

(d)

In addition to payment of principal and the Discount, Borrower shall pay the Variable Loan Fee due on each Variable Loan in accordance with Section 1.04(b)(ii) of the Loan Agreement.

4.

Application of Payments.  If at any time Lender receives, from Borrower or otherwise, any amount applicable to the Indebtedness that is less than all amounts due and payable at such time, Lender may apply that payment to amounts then due and payable in any manner and in any order determined by Lender, in Lender’s discretion.  Borrower agrees that neither Lender’s acceptance of a payment from Borrower in an amount that is less than all amounts then due and payable nor Lender’s application of such payment shall constitute or be deemed to constitute either a waiver of the unpaid amounts or an accord and satisfaction.

5.

Security.  The Indebtedness is secured, among other things, by a multifamily mortgage, deed to secure debt or deed of trust dated as of the date of this Note (the “Security Instrument”) and reference is made to the Security Instrument for other rights of Lender concerning the collateral for the Indebtedness.

6.

Acceleration.  If an Event of Default has occurred and is continuing, the entire unpaid principal balance, any accrued interest, the prepayment premium payable under Paragraph 10, if any, and all other amounts payable under this Note and any other Loan Document shall at once become due and payable, at the option of Lender, without any additional notice to Borrower.  Lender may exercise this option to accelerate regardless of any prior forbearance.

7.

Late Charge.  If any monthly amount payable under this Note or under the Security Instrument or any other Loan Document is not received by Lender within 10 days after the amount is due, Borrower shall pay to Lender, immediately and without demand by Lender, a

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late charge equal to 5 percent of such amount.  Borrower acknowledges that its failure to make timely payments will cause Lender to incur additional expenses in servicing and processing the loan evidenced by this Note (the “Loan”), and that it is extremely difficult and impractical to determine those additional expenses.  Borrower agrees that the late charge payable pursuant to this Paragraph represents a fair and reasonable estimate, taking into account all circumstances existing on the date of this Note, of the additional expenses Lender will incur by reason of such late payment.  The late charge is payable in addition to, and not in lieu of, any interest payable at the Default Rate pursuant to Paragraph 8.

8.

Default Rate.  So long as any monthly installment or any other payment due under this Note remains past due for 30 days or more, interest under this Note shall accrue on the unpaid principal balance from the earlier of the due date of the first unpaid monthly installment or other payment due, as applicable, at a rate (the “Default Rate”) equal to the lesser of 4 percentage points above the rate stated in the first paragraph of this Note or the maximum interest rate which may be collected from Borrower under applicable law.  If the unpaid principal balance and all accrued interest are not paid in full on the Maturity Date, the unpaid principal balance and all accrued interest shall bear interest from the Maturity Date at the Default Rate.  Borrower also acknowledges that its failure to make timely payments will cause Lender to incur additional expenses in s ervicing and processing the Loan, that, during the time that any monthly installment or payment under this Note is delinquent for more than 30 days, Lender will incur additional costs and expenses arising from its loss of the use of the money due and from the adverse impact on Lender’s ability to meet its other obligations and to take advantage of other investment opportunities, and that it is extremely difficult and impractical to determine those additional costs and expenses.  Borrower also acknowledges that, during the time that any monthly installment or payment due under this Note is delinquent for more than 30 days, Lender’s risk of nonpayment of this Note will be materially increased and Lender is entitled to be compensated for such increased risk.  Borrower agrees that the increase in the rate of interest payable under this Note to the Default Rate represents a fair and reasonable estimate, taking into account all circumstances existing on the date of this Note, of the additional costs and expenses Lender will incur by reason of Borrower’s delinquent payment and the additional compensation Lender is entitled to receive for the increased risks of nonpayment associated with a delinquent loan.

9.

Limits on Personal Liability.

(a)

Except as otherwise provided in this Paragraph 9, Borrower shall have no personal liability under this Note, the Security Instrument or any other Loan Document for the repayment of the Indebtedness or for the performance of any other obligations of Borrower under the Loan Documents, and Lender’s only recourse for the satisfaction of the Indebtedness and the performance of such obligations shall be Lender’s exercise of its rights and remedies with respect to the Mortgaged Property and any other collateral held by Lender as security for the Indebtedness.  This limitation on Borrower’s liability shall not limit or impair Lender’s enforcement of its rights against any guarantor of the Indebtedness or any guarantor of any obligations of Borrower.

(b)

Borrower shall be personally liable to Lender for the repayment of a portion of the Indebtedness equal to any loss or damage suffered by Lender as a result of (1) failure of Borrower to pay to Lender upon demand after an Event of Default, all Rents to which Lender is entitled under Section 3(a) of the Security Instrument and the amount of all security deposits collected by Borrower from tenants then in residence; (2) failure of Borrower to apply all insurance proceeds and condemnation proceeds as required by the Security Instrument; (3) failure of Borrower to comply with Section 14(d) or (e) of the Security Instrument relating to the delivery of books and records, statements, schedules and reports; (4)  fraud or written material misrepresentation by Borrower or any officer, director, partner, member or employee of Borrower in connection with the application for or creation of the Indebtedn ess or any request

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for any action or consent by Lender; or (5) failure to apply Rents, first, to the payment of reasonable operating expenses (other than Property management fees that are not currently payable pursuant to the terms of an Assignment of Management Agreement or any other agreement with Lender executed in connection with the Loan) and then to amounts  (“Debt Service Amounts”) payable under this Note, the Security Instrument or any other Loan Document (except that Borrower will not be personally liable (i) to the extent that Borrower lacks the legal right to direct the disbursement of such sums because of a bankruptcy, receivership or similar judicial proceeding, or (ii) with respect to Rents that are distributed in any calendar year if Borrower has paid all operating expenses and Debt Service Amounts for that calendar year).

(c)

Borrower shall become personally liable to Lender for the repayment of all of the Indebtedness upon the occurrence of any of the following Events of Default: (1) Borrower’s acquisition of any property or operation of any business not permitted by Section 33 of the Security Instrument; or (2) a Transfer that is an Event of Default under Section 21 of the Security Instrument.

(d)

To the extent that Borrower has personal liability under this Paragraph 9, Lender may exercise its rights against Borrower personally without regard to whether Lender has exercised any rights against the Mortgaged Property or any other security, or pursued any rights against any guarantor, or pursued any other rights available to Lender under this Note, the Security Instrument, any other Loan Document or applicable law. For purposes of this Paragraph 9, the term “Mortgaged Property” shall not include any funds that (1) have been applied by Borrower as required or permitted by the Security Instrument prior to the occurrence of an Event of Default, or (2) Borrower was unable to apply as required or permitted by the Security Instrument because of a bankruptcy, receivership, or similar judicial proceeding.

10.

Voluntary and Involuntary Prepayments.  Pursuant to the terms of the Loan Agreement, Borrower shall pay the entire amount of the Discount on any Variable Loan in advance.  Accordingly, any Variable Loan may be prepaid in whole or in part and at any time without penalty.  Borrower shall give Lender six (6) Business Days advance notice of any prepayment.

11.

Costs and Expenses.  Borrower shall pay on demand all reasonable expenses and costs, including reasonable fees and out-of-pocket expenses of attorneys and expert witnesses and costs of investigation, incurred by Lender as a result of any default under this Note or in connection with efforts to collect any amount due under this Note, or to enforce the provisions of any of the other Loan Documents, including those incurred in post-judgment collection efforts and in any bankruptcy proceeding (including any action for relief from the automatic stay of any bankruptcy proceeding) or judicial or non-judicial foreclosure proceeding.

12.

Forbearance.  Any forbearance by Lender in exercising any right or remedy under this Note, the Security Instrument, or any other Loan Document or otherwise afforded by applicable law, shall not be a waiver of or preclude the exercise of that or any other right or remedy.  The acceptance by Lender of any payment after the due date of such payment, or in an amount which is less than the required payment, shall not be a waiver of Lender’s right to require prompt payment when due of all other payments or to exercise any right or remedy with respect to any failure to make prompt payment.  Enforcement by Lender of any security for Borrower’s obligations under this Note shall not constitute an election by Lender of remedies so as to preclude the exercise of any other right or remedy available to Lender.

13.

Waivers.  Except as expressly provided in the Loan Agreement, presentment, demand, notice of dishonor, protest, notice of acceleration, notice of intent to demand or accelerate payment or maturity, presentment for payment, notice of nonpayment, grace, and

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diligence in collecting the Indebtedness are waived by Borrower and all endorsers and guarantors of this Note and all other third party obligors.

14.

Loan Charges.  If any applicable law limiting the amount of interest or other charges permitted to be collected from Borrower in connection with the Loan is interpreted so that any interest or other charge provided for in any Loan Document, whether considered separately or together with other charges provided for in any other Loan Document, violates that law, and Borrower is entitled to the benefit of that law, that interest or charge is hereby reduced to the extent necessary to eliminate that violation.  Borrower agrees to an effective rate of interest that is the stated rate of interest plus any additional rate of interest resulting from any other charges or fees that are to be paid by Borrower to Lender that may be found by a court of competent jurisdiction to be interest.  The amounts, if any, previously paid to Lender in excess of the permitted amounts shall be applie d by Lender to reduce the unpaid principal balance of this Note.  For the purpose of determining whether any applicable law limiting the amount of interest or other charges permitted to be collected from Borrower has been violated, all Indebtedness that constitutes interest, as well as all other charges made in connection with the Indebtedness that constitute interest, shall be deemed to be allocated and spread ratably over the stated term of the Note.  Unless otherwise required by applicable law, such allocation and spreading shall be effected in such a manner that the rate of interest so computed is uniform throughout the stated term of the Note.

15.

Commercial Purpose.  Borrower represents that the Indebtedness is being incurred by Borrower solely for the purpose of carrying on a business or commercial enterprise, and not for personal, family or household purposes.

16.

Counting of Days.  Except where otherwise specifically provided, any reference in this Note to a period of “days” means calendar days, not Business Days.

17.

Governing Law; Consent to Jurisdiction; WAIVER OF JURY TRIAL.  The provisions of Section 11.07 of the Loan Agreement (entitled “Choice of Law; Consent to Jurisdiction; Waiver of Jury Trial”) are hereby incorporated into this Note by this reference to the fullest extent as if the text of such Section were set forth in its entirety herein.

18.

Captions.  The captions of the paragraphs of this Note are for convenience only and shall be disregarded in construing this Note.

19.

Notices.  All notices, demands and other communications required or permitted to be given by Lender to Borrower pursuant to this Note shall be given in accordance with Section 11.09 of the Loan Agreement.

20.

Security for this Note.  Reference is made hereby to the Loan Agreement and the Security Documents for additional rights and remedies of Lender relating to the indebtedness evidenced by this Note.  Each Security Document shall be released in accordance with the provisions of the Security Documents.

21.

Loan May Not Be Reborrowed.  Borrower may not re-borrow any amounts under this Note which it has previously borrowed and repaid under this Note.

22.

Default Under Loan Agreement and Other Loan Documents.  The occurrence of an Event of Default under the Loan Agreement or the Security Instrument shall constitute an “Event of Default” under this Note in accordance with the Loan Agreement and the Security Instrument.  Upon the occurrence of an Event of Default under the Loan Agreement or the Security Instrument, the entire principal amount outstanding hereunder and accrued interest thereon shall at once become due and payable, at the option of the holder hereof.

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23.

Loan Confirmation Instruments; Accounting for Variable Loans.  The terms of the Loan Agreement and this Note govern the repayment, and all other terms relating to the Variable Loan.  However, Borrower shall execute a Loan Confirmation Instrument to create a physical instrument evidencing each MBS issued to fund the Variable Loan.  The Loan Confirmation Instrument executed by Borrower in accordance with Section 2.02 of the Loan Agreement shall set forth the amount, term, Discount, Closing Date and certain other terms of each MBS issued to fund the Variable Loan.  The Loan Confirmation Instrument shall conclusively establish each of the terms described in the preceding sentence, absent manifest error.  The MBS evidenced by the Loan Confirmation Instrument does not represent a separate indebtedness from that evidenced by this Note.   In making proof of thi s Note, no other documents other than this Note shall be required.  In making proof of the amount and terms of the outstanding Variable Loans under this Note, this Note, the related Loan Confirmation Instruments, and Lender’s records concerning payments made by Borrower under this Note, shall be conclusive evidence of the terms and outstanding amounts of the Variable Loan, absent manifest error.

24.

Modifications to Note.  There are standard modifications to this Note that are attached as Exhibit B-1 and Exhibit B-2 hereto.  In addition, there may be special modifications to this Note attached as Exhibit B-3 hereto.  All such exhibits are hereby incorporated into this Note as a part hereof.

IN WITNESS WHEREOF, Borrower has signed and delivered this Note under seal or has caused this Note to be signed and delivered under seal by its duly authorized representative.  Borrower intends that this Note shall be deemed to be signed and delivered as a sealed instrument.

[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]

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VMS NATIONAL PROPERTIES, an Illinois joint venture general partnership

By:  VMS National Residential Portfolio I, an Illinois limited partnership, its joint venture partner

By:  Maeril, Inc., a Delaware corporation, its general partner

By:   /s/Patti K. Fielding

Patti K. Fielding

Executive Vice President and Treasurer

By:  VMS National Residential Portfolio II, an Illinois limited partnership, its joint venture partner

By:  Maeril, Inc., a Delaware corporation, its general partner

By:   /s/Patti K. Fielding

Patti K. Fielding

Executive Vice President and Treasurer

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PAY TO THE ORDER OF FANNIE MAE, WITHOUT RECOURSE.

CAPMARK FINANCE INC., a California corporation

By: /s/Max W. Moore

Max W. Foore

Vice President

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EXHIBIT B-1

GMACCM LOAN AGREEMENT MODIFICATIONS

During any time that the terms, covenants and provisions of that certain Loan Agreement dated as of November 1, 2002 and more particularly described in the second paragraph on page 1 of the Note apply to the Variable Loan evidenced by the Note, paragraphs 3 and 23 of the Note are amended and replaced with the following substitute paragraphs 3 and 23:

“3.

Payment of Principal and Interest.  Principal and interest shall be paid as follows:

(a)

This Note shall evidence a Variable Loan made from time to time under the Loan Agreement.  Borrower shall not be required to make monthly principal payments prior to the Fannie Mae Addition Date, but shall make monthly payments of principal after the Fannie Mae Reassignment Date, if it occurs, as set forth in Section 1.04(d) of the Loan Agreement.

(b)

Borrower shall pay actual interest on the Variable Loan during the period described in accordance with Section 1.04(a) of the Loan Agreement.  Borrower shall pay interest on its Variable Rate Loan in arrears at a rate equal to LIBOR Rate plus a number of basis points determined in accordance with Section 2.01 of the Loan Agreement.  For purposes of the previous sentence, the LIBOR Rate shall be reset every ninety (90) days commencing on the date that is ninety (90) days after the Initial Closing Date.  On the date the Variable Loan is funded, Borrower shall pay interest in advance from the date of funding through January 31, 2007.  On March 1, 2007 and on the first (1st) day of each calendar month thereafter, Borrower shall pay interest in arrears calculated for the actual number of days since the first (1st) day of the previous calendar month.

(c)

If not sooner paid, the entire principal amount of the Variable Loan shall be due and payable in accordance with Section 1.02 of the Loan Agreement.  

(d)

Borrower shall not pay any Discount.

23.

Loan Confirmation Instruments; Accounting for Variable Loans.  The terms of the Loan Agreement and this Note govern the repayment, and all other terms relating to the Variable Loan.  However, Borrower shall execute one or a series of Loan Confirmation Instruments to create a physical instrument evidencing the terms of the Variable Loan.  The Loan Confirmation Instrument or series of Loan Confirmation Instruments executed by Borrower in accordance with Section 2.02 of the Loan Agreement shall set forth the amount, term, the interest rate spread over the LIBOR Rate Closing Date and certain other terms related to the funding the Variable Loan.  The Loan Confirmation Instrument shall conclusively establish each of the terms described in the preceding sentence, absent manifest error.  The variable terms evidenced by the Loan Confirmation Instrument do not represe nt a separate indebtedness from that evidenced by this Note.   In making proof of this Note, no other documents other than this Note shall be required.  In making proof of the amount and terms of the outstanding Variable Loans under this Note, this Note, the related Loan Confirmation Instruments, and Lender’s records concerning payments made by Borrower under this Note, shall be conclusive evidence of the terms and outstanding amounts of the Variable Loan, absent manifest error.”

During any time that the terms, covenants and provisions of that certain Amended and Restated Loan Agreement dated as of September 16, 2002 and more particularly described in the second paragraph on page 1 of the Note apply to the Variable Loan evidenced by the Note, this Exhibit B-1 shall not apply and paragraphs 3 and 23 of the Note shall not be amended or replaced with the provisions set forth in this Exhibit B-1.

B-1

EXHIBIT B-2

AIMCO MODIFICATIONS

The following modifications are made to the text of the Note that precedes this Exhibit:

1.

Section 9(b)(4) is modified by deleting “or” at the end thereof.

2.

Section 9(b)(5) is modified to read as follows:

“(5) failure to apply Rents, first, to the payment of reasonable operating expenses (other than Property management fees that are not currently payable pursuant to the terms of an Assignment of Management Agreement or any other agreement with Lender executed in connection with the Loan) and then to amounts (“Debt Service Amounts”) payable under this Note, the Security Instrument or any other Loan Document (except that Borrower will not be personally liable (i) to the extent that Borrower lacks the legal right to direct the disbursement of such sums because of a bankruptcy, receivership or similar judicial proceeding, or (ii) with respect to Rents that are distributed in any calendar quarter if Borrower has paid all operating expenses and Debt Service Amounts for such calendar quarter to date); or”

3.

A new Section 9(b)(6) is added following Section 9(b)(5), stating as follows:

“(6) failure to pay when due any water and sewer charges, fire, hazard or other insurance premiums and ground rents owing from time to time in connection with the Mortgaged Property.”

B-2

EX-10

EXHIBIT 10.42

The Bluffs Apartments

GUARANTY

This Guaranty (the “Guaranty”) is made and entered into as of the 18^th day of January, 2007 by AIMCO PROPERTIES, L.P., a Delaware limited partnership (the “Guarantor”), for the benefit of CAPMARK FINANCE INC., a California corporation (“Lender”).

RECITALS

A.

Lender has agreed to execute both (i) that certain Amended and Restated Loan Agreement, dated as of September 16, 2002, by and among AIMCO Properties, L.P., a Delaware limited partnership, certain borrowers signatory thereto and Lender and (ii) that certain Loan Agreement dated as of November 1, 2002, by and among certain borrowers signatory thereto and Lender (as amended, supplemental or otherwise modified or amended and restated from time to time, the “Loan Agreement”),  pursuant to which, inter alia, Lender has agreed, subject to the terms, conditions and limitations of the Loan Agreement, to make a loan to VMS National Properties, an Illinois joint venture general partnership (the “Borrower”) from time to time loan to be evidenced by the Note (the “Loan”).  Terms used herein not defined herein have the definition given them in the Loan Agreement.

B.

The repayment of the Loan and all of the Obligations of the Borrower under the Loan Agreement or the other Loan Documents are guaranteed by this Guaranty to the extent of Borrower’s personal liability as provided in Section 9 of the Note evidencing the Loan, and except for such obligations described herein, Guarantor shall have no liability in connection with, or responsibility to perform, under or in accordance with the Loan Agreement or other Loan Documents.

C.

Guarantor owns, directly or indirectly, an ownership interest in the Borrower and will receive a direct and material benefit from the Loans to the Borrower.

D.

Lender is willing to make the Loan to the Borrower only if Guarantor agrees to enter into this Guaranty.

NOW, THEREFORE, in order to induce Lender to make the Loan to Borrower, and in consideration thereof, Guarantor hereby agrees as follows:

Section 1.

Definitions.  All capitalized terms used but not defined in this Guaranty shall have the meanings ascribed to such terms in the Loan Agreement.  The following terms shall have the meaning set forth below for purposes of this Guaranty:

“Material Adverse Effect” means, with respect to any circumstance, act, condition or event of whatever nature (including any adverse determination in any litigation, arbitration, or governmental investigation or proceeding), whether singly or in conjunction with any other event or events, act or acts, condition or conditions, or circumstance or circumstances, whether or not related, a material adverse change in or a materially adverse effect upon the present or future ability of the Guarantor, to the extent specifically referred to in the applicable provision of that Guaranty, to perform the Guaranteed Obligations.

“Net Worth” means, as of any date of determination and without double counting any item, the sum of the capital stock or other capital equity interests and additional paid-in capital

1

plus retained earnings (or minus accumulated deficits) of the Guarantor, the REIT and their respective Subsidiaries on a consolidated basis determined in conformity with GAAP.

“REIT” means Apartment Investment and Management Company, a Maryland corporation.

“Subsidiary” means, with respect to the REIT, the Guarantor or an Affiliate of either of them, a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise controlled, directly or indirectly, through one or more intermediaries, or both, by the REIT, the Guarantor or an Affiliate of either of them.

Section 2.

Guaranty of Payment.  Guarantor irrevocably, absolutely and unconditionally guarantees to Lender all of the following (collectively, the “Guaranteed Obligations”):  the due and punctual payment when due, whether at maturity or earlier, by reason of acceleration or otherwise, at all times, of all amounts for which Borrower is personally liable under Section 9 of the Note.

This Guaranty shall be an unconditional guaranty of payment and performance and not of collection, and is in no way conditioned upon any attempt by Lender to pursue or exhaust any remedy against Borrower.  This Guaranty is a continuing guaranty which shall remain in full force and effect until all of the Guaranteed Obligations have been paid and performed in full; and Guarantor shall not be released from any obligations to Lender under this Guaranty as long as any amount payable by the Borrower to Lender, or any obligation by the Borrower, under the Loan Documents is not performed, satisfied, settled or paid in full.

Section 3.

Form of Payment.  All payments under this Guaranty shall be made to Lender in immediately available funds, without reduction by any recoupment, set-off, counterclaim or cross-claim against Lender.

Section 4.

Guarantor’s Obligations are Absolute.  The obligations of Guarantor under this Guaranty shall be absolute and unconditional, shall not be subject to any counterclaim, set-off, recoupment, deduction, or defense based upon any claim Guarantor may have against Lender or Borrower and shall remain in full force and effect without regard to, and shall not be released, discharged or terminated or in any other way affected by, any circumstance or condition (whether or not Guarantor shall have any knowledge or notice thereof), including, without limitation:

(a)

any amendment or modification of, or extension of time for payment of any of the principal of, interest on or other amounts payable under the Loan Documents;

(b)

any exercise or non-exercise by Lender of any right, power or remedy under or in respect of the Loan Documents, or any waiver, consent, forbearance, indulgence or other action, inaction or omission by Lender under or in respect of the Loan Documents;

(c)

any assignment, sale or other transfer of Borrower’s interest in all or any part of the real or personal property which at any time constitutes collateral for the payment of the Guaranteed Obligations, including, without limitation, a conveyance of such property by Borrower to Lender by deed in lieu of foreclosure;

(d)

any bankruptcy, insolvency, reorganization, adjustment, dissolution, liquidation or other like proceeding involving or affecting Borrower or Lender or their respective properties or

2

creditors, or any action taken with respect to the Loan Documents by any trustee or receiver of Borrower or Lender, or by any court, in any such proceeding;

(e)

any invalidity or unenforceability, in whole or in part, of any term or provision of the Loan Documents or Borrower’s incapacity or lack of authority to enter into the Loan Documents;

(f)

any release, compromise, settlement or discharge with respect to all or any portion of Borrower’s obligations under the Loan Documents;

(g)

any acceptance of additional or substituted collateral for payment of the Guaranteed Obligations or any release or subordination of any collateral held at any time by Lender as security for the payment of the Guaranteed Obligations; or

(h)

any resort to Guarantor for payment of all or any portion of the Guaranteed Obligations, whether or not Lender shall have resorted to any collateral securing the Guaranteed Obligations, if any, or shall have proceeded to pursue or exhaust its remedies against Borrower (or any other Person) primarily or secondarily liable for the Guaranteed Obligations.

No exercise, delay in exercise or non-exercise by Lender of any right hereby given it, no dealing by Lender with Borrower, Guarantor or any other Person, no change, impairment or suspension of any right or remedy of Lender, and no act or thing which, but for this provision, could act as a release or exoneration of the liabilities of Guarantor hereunder, shall in any way affect, decrease, diminish or impair any of the obligations of Guarantor hereunder or give Guarantor or any other Person any recourse or defense against Lender.

Section 5.

Waiver.  Guarantor unconditionally waives the following:

(a)

notice of acceptance of this Guaranty and notice of any of the matters referred to in Section 4 hereof;

(b)

all notices which may be required by statute, rule of law or otherwise to preserve intact any rights which Lender may have against Guarantor under this Guaranty, including, without limitation, any demand, proof or notice of non-payment of any of the principal of, interest on or other amounts payable under the Loan Documents, and notice of any failure on the part of Borrower to perform and comply with any covenant, agreement, term or condition of the Loan Documents;

(c)

any right to the enforcement, assertion or exercise of any right, power or remedy conferred upon Lender in the Loan Documents or otherwise;

(d)

any requirement that Lender act with diligence in enforcing its rights under the Loan Documents or this Guaranty;

(e)

any right to require Lender to proceed against or exhaust its recourse against Borrower or any security or collateral held by Lender, if any, at any time for the payment of the Guaranteed Obligations or to pursue any other remedy in its power before being entitled to payment from Guarantor under this Guaranty or before proceeding against Guarantor;

(f)

any failure by Lender to file or enforce a claim against the estate (either in administration, bankruptcy or any other proceeding) of Borrower or any other Person;

3

(g)

any defense based upon an election of remedies by Lender which destroys or otherwise impairs the subrogation rights of Guarantor or the right of Guarantor (after payment of the Guaranteed Obligations) to proceed against Borrower for reimbursement, or both;

(h)

any defense based upon any taking, modification or release of any collateral for the Guaranteed Obligations, if any, or any failure to perfect any security interest in, or the taking of, or failure to take any other action with respect to, any collateral securing payment of the Guaranteed Obligations, if any;

(i)

any defense based upon the addition, substitution or release, in whole or in part, of any Person(s), including, without limitation, another guarantor, primarily or secondarily liable for or in respect of the Guaranteed Obligations;

(j)

any rights or defenses based upon an offset by Guarantor against any obligation now or hereafter owed to Guarantor by Borrower; and

(k)

all other notices which may or might be lawfully waived by Guarantor;

it being the intention hereof that Guarantor shall remain liable as principal, to the extent set forth in this Guaranty, until the payment and performance in full of the Guaranteed Obligations, notwithstanding any act, omission or thing which might otherwise operate as a legal or equitable discharge of Guarantor other than the payment and performance in full of the Guaranteed Obligations.  No delay by Lender in exercising any rights and/or powers hereunder or in taking any action to enforce Borrower’s obligations under the Loan Documents shall operate as a waiver as to such rights or powers or in any manner prejudice any and all of Lender’s rights and powers hereunder against Guarantor.  The intention of Guarantor under this Guaranty is that, so long as any of the Guaranteed Obligations remains unsatisfied, the obligations of Guarantor hereunder shall not be discharged except by performance and then only to the extent of such performance.  Guarantor agrees that Guarantor’s obligations hereunder shall not be affected by any circumstances, whether or not referred to in this Guaranty, which might constitute a legal or equitable discharge of a surety or guarantor.

Section 6.

Election of Remedies.  This Guaranty may be enforced from time to time, as often as occasion therefor may arise, and without any requirement that Lender must first pursue or exhaust any remedies available to it against Borrower under the Loan Documents or against any other Person or resort to any collateral at any time held by it for performance of the Guaranteed Obligations, if any, or any other source or means of obtaining payment of any of the Guaranteed Obligations.

Section 7.

Representations and Warranties of Guarantor.  Guarantor hereby represents and warrants to the Lender as follows:

(a)

Due Organization; Qualification.  Guarantor is qualified to transact business and is in good standing in the State in which it is organized and in each other jurisdiction in which such qualification and/or standing is necessary to the conduct of its business and where the failure to be so qualified would adversely affect the validity of, the enforceability of, or the ability of Guarantor to perform the Guaranteed Obligations.

(b)

Power and Authority.  Guarantor has the requisite power and authority (i) to own its properties and to carry on its business as now conducted and as contemplated to be conducted in connection with the performance of the Guaranteed Obligations, and (ii) to execute and deliver this Guaranty and to carry out the transactions contemplated by this Guaranty.

(c)

Due Authorization.  The execution, delivery and performance of this Guaranty has been duly authorized by all necessary action and proceedings by or on behalf of Guarantor,

4

and no further approvals or filings of any kind, including any approval of or filing with any Governmental Authority, are required by or on behalf of Guarantor as a condition to the valid execution, delivery and performance by Guarantor of this Guaranty.

(d)

Valid and Binding Obligations.  This Guaranty has been duly authorized, executed and delivered by Guarantor and constitutes the legal, valid and binding obligations of Guarantor, enforceable against Guarantor in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles affecting the enforcement of creditors’ rights generally or by equitable principles or by the exercise of discretion by any court.

(e)

Non-contravention: No Liens.  Neither the execution and delivery of this Guaranty, nor the fulfillment of or compliance with the terms and conditions of this Guaranty nor the payment or performance of the Guaranteed Obligations:

(i)

does or will conflict with or result in any breach or violation of any Applicable Law enacted or issued by any Governmental Authority or other agency having jurisdiction over Guarantor, any of the Mortgaged Properties or any other portion of the Collateral or assets of Guarantor, or any judgment or order applicable to Guarantor or to which Guarantor is subject;

(ii)

does or will conflict with or result in any material breach or violation of, or constitute a default under, any of the terms, conditions or provisions of Guarantor’s Organizational Documents, any indenture, existing agreement or other instrument to which Guarantor is a party or to which Guarantor, any of the Mortgaged Properties or any other portion of the Collateral or other assets of Guarantor is subject; or

(iii)

does or will require the consent or approval of any creditor of Guarantor, any Governmental Authority or any other Person except such consents or approvals which have already been obtained.

(f)

Pending Litigation or Other Proceedings.  Since the date of the most recent financial statements delivered to Lender pursuant to Section 8(b) of this Guaranty, there is no pending or, to the best knowledge of guarantor, threatened action, suit, proceeding or investigation, at law or in equity, before any court, board, body or official of any Governmental Authority or arbitrator which, if decided adversely to Guarantor, would have, or may reasonably be expected to have, a Material Adverse Effect on Guarantor. Guarantor is not in default with respect to any order of any Governmental Authority to any extent which would have, or may reasonably be expected to have, a Material Adverse Effect on Guarantor.

(g)

Solvency.  Guarantor is not insolvent and will not be rendered insolvent by the transaction contemplated by this Guaranty and after giving effect to such transaction, Guarantor will not be left with an unreasonably small amount of capital with which to engage in its business or undertakings, nor will Guarantor have incurred, have intended to incur, or believe that it has incurred, debts beyond its ability to pay such debts as they mature. Guarantor did not receive less than a reasonably equivalent value in exchange for incurrence of the Guaranteed Obligations.  There (i) is no contemplated, pending or, to the best of Guarantor’s knowledge, threatened bankruptcy, reorganization, receivership, insolvency or like proceeding, whether voluntary or involuntary, affecting Guarantor and (ii) has been no assertion or exercise of jurisdiction over Guarantor by any court empowered to exercise bankruptcy powers.

(h)

No Contractual Defaults.  There are no material defaults by Guarantor or, to the knowledge of Guarantor, by any other Person under any contract to which Guarantor is a party other than defaults which do not have, and are not reasonably be expected to have, a Material Adverse Effect on Guarantor.  Neither Guarantor nor, to the knowledge of Guarantor, any other

5

Person, has received notice or has any knowledge of any existing circumstances in respect of which it could receive any notice of default or breach in respect of any contracts, which default would have, or which may reasonably be expected to have, a Material Adverse Effect on Guarantor.

(i)

Representations True and Correct.  The representations and warranties made by Guarantor in this Guaranty are true, complete and correct in all material respects as of the Initial Closing Date and do not contain any untrue statement of material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.

(j)

ERISA.  Guarantor is in compliance in all material respects with all applicable provisions of ERISA and has not incurred any liability to the PBGC on a Plan under Title LV of ERISA.  None of the assets of Guarantor constitute plan assets (within the meaning of Department of Labor Regulation § 2510.3-101) of any employee benefit plan subject to Title I of ERISA.

(k)

Financial Information.  The financial statements of Guarantor which have been furnished to the Lender are complete and accurate in all material respects and present fairly the financial condition of Guarantor, as of its date in accordance with GAAP, applied on a consistent basis.  Since the date of the most recent of such financial statements no event has occurred which would have, or may reasonably be expected to have a Material Adverse Effect on Guarantor, except as disclosed in any filings made by Guarantor or its affiliates with the United States Securities and Exchange Commission (“SEC”).  Guarantor has no material contingent obligations which are not otherwise disclosed in its most recent financial statements except as disclosed in any filings made by Guarantor or its affiliates with the SEC.

(l)

Accuracy of Information.  No information, statement or report furnished in writing to the Lender by Guarantor concerning the Guarantor in connection with this Guaranty or any other Loan Document or in connection with the consummation of the transactions contemplated hereby and thereby contains any material misstatement of fact or omits to state a material fact necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading as of the date made, except to the extent that such misstatements and omissions when considered in the totality of such information, statements and reports furnished by Guarantor are not materially misleading in the aggregate; provided, however, the foregoing representation and warranty shall not apply to any information, statement or report prepared by any third party.

(m)

No Conflicts of Interest.  To the best knowledge of Guarantor, no member, officer, agent or employee of the Lender has been or is in any manner interested, directly or indirectly, in that Person’s own name, or in the name of any other Person, in the Guarantor (other than through the ownership of publicly traded shares of common stock of affiliates of the Guarantor or limited partnership units of Guarantor), the Loan Documents, or any Mortgaged Property, in any contract for property or materials to be furnished or used in connection with such Mortgaged Property or in any aspect of the transactions contemplated by the Loan Documents.

(n)

Governmental Approvals.  To the best of Guarantor’s knowledge, no Governmental Approval not already obtained or made is required for the execution and delivery of this Guaranty or the performance of the terms and provisions hereof by Guarantor.

(o)

Governmental Orders.  Guarantor is not presently under any cease or desist order or other orders of a similar nature, temporary or permanent, of any Governmental Authority which would have the effect of preventing or hindering performance of its duties hereunder, nor

6

are there any proceedings presently in progress or to its knowledge contemplated which would, if successful, lead to the issuance of any such order.

(p)

No Reliance.  Guarantor acknowledges, represents and warrants that it understands the nature and structure of the transactions contemplated by this Guaranty and the other Loan Documents; that it is familiar with the provisions of all of the documents and instruments relating to such transactions; that it understands the risks inherent in such transactions, including the risk of loss of all or any of the Mortgaged Properties; and that it has not relied on the Lender or Fannie Mae for any guidance or expertise in analyzing the financial or other consequences of the transactions contemplated by this Guaranty or any other Loan Document or otherwise relied on the Lender or Fannie Mae in any manner in connection with interpreting, entering into or otherwise in connection with this Guaranty, any other Loan Document or any of the matters contemplated hereby or thereby.

(q)

Compliance with Applicable Law.  Guarantor is in compliance with Applicable Law, including all Governmental Approvals, if any, except for such items of noncompliance that, singly or in the aggregate, have not had and are not reasonably expected to cause, a Material Adverse Effect on Guarantor.

(r)

Contracts with Affiliates.  Except for the management agreement relating to each of the Mortgaged Properties or in the ordinary course of business and on terms which are no less favorable to the Guarantor than would be obtained in a corporate arms-length transaction with an unrelated third party, Guarantor has not entered into and is not a party to any material contract, lease or other agreement with any Affiliate of Guarantor for the provision of any service, materials or supplies relating to any Mortgaged Property.

Section 8.

Affirmative Covenants of Guarantor.  Guarantor agrees and covenants with the Lender that, at all times during the Term of this Guaranty:

(a)

Maintenance of Existence.  Guarantor shall maintain its existence and continue to be a limited partnership organized under the laws of the state of its organization. Guarantor shall continue to be duly qualified to do business in each jurisdiction in which such qualification is necessary to the conduct of its business and where the failure to be so qualified would adversely affect the validity of, the enforceability of, or the ability to perform, its obligations under this Guaranty.

(b)

Financial Statements; Accountants’ Reports: Other Information.  The Guarantor shall keep and maintain at all times complete and accurate books of accounts and records in sufficient detail to correctly reflect all of the Guarantor’s financial transactions and assets. In addition, the Guarantor shall furnish, or cause to be furnished, to the Lender the following:

(i)

So long as Guarantor is a reporting company under the Securities and Exchange Act of 1934 (the “’34 Act”), promptly upon their becoming available, copies of (A) all 10K’s, 10Q’s, 8K’s, annual reports and proxy statements, and all replacement, substitute or similar filings or reports required to be filed after the date of this Guaranty by the SEC or other Governmental Authority exercising similar functions, and (B) all press releases and other statements made available generally by Guarantor to the public concerning material developments in the business of Guarantor.

(ii)

In the event Guarantor is not a reporting company under the ’34 Act,

(A)

Annual Financial Statements.  As soon as available, and in any event within 90 days after the close of its fiscal year during the Term of this Agreement, the audited balance sheet of Guarantor as of the end of such fiscal year, the audited statement of income, equity and retained earnings of Guarantor

7

for such fiscal year and the audited statement of cash flows of Guarantor for such fiscal year, all in reasonable detail and stating in comparative form the respective figures for the corresponding date and period in the prior fiscal year, prepared in accordance with GAAP, consistently applied, and accompanied by a certificate of Guarantor’s independent certified public accountants to the effect that such financial statements have been prepared in accordance with GAAP, consistently applied, and that such financial statements fairly present the results of its operations and financial condition for the periods and dates indicated with such certification to be free of exceptions and qualifications as to the scope of the audit or as to the going concern nature of the business.

(B)

Quarterly Financial Statements.  As soon as available, and in any event within 45 days after each of the first three fiscal quarters of each fiscal year during the Term of this Agreement, the unaudited balance sheet of Guarantor as of the end of such fiscal quarter, the unaudited statement of income and retained earnings of Guarantor and the unaudited statement of cash flows of Guarantor for the portion of the fiscal year ended with the last day of such quarter, all in reasonable detail and stating in comparative form the respective figures for the corresponding date and period in the previous fiscal year, accompanied by a certificate of a member of Senior Management (which certificate shall be without personal liability to such officer) stating that such financial statements have been prepared in accordance with GAAP, consistently applied, and fairly present th e results of its operations and financial condition for the periods and dates indicated subject to year end adjustments in accordance with GAAP.

(iii)

[Left blank intentionally]

(iv)

Other Reports.  Promptly upon receipt thereof, all schedules, financial statements or other similar reports delivered by the Guarantor pursuant to the Loan Documents or reasonably requested by the Lender with respect to the Guarantor’s business affairs or condition (financial or otherwise) subject to the confidentiality covenant set forth below.  

After the providing by Guarantor of any statement, report or other information on a collective basis to Standard & Poor’s, Moody’s Investors Service, Duff & Phelps, Fitch and/or any other rating agency, and/or after providing any statement, report or other information on a collective basis to the banks or other institutions providing unsecured lines of credit and loans to Guarantor, Guarantor shall promptly furnish such statement, report or other information to Lender.

As used in this Paragraph (iv), the phrase “on a collective basis” means as provided to a group as a whole as opposed to an individual basis, e.g.., providing information to a rating agency or to a bank to respond to a particular request of such rating agency or bank.

The Lender agrees to treat all Information received by it (I) under this Paragraph (iv) as confidential and (II) which Guarantor requests in writing to the Persons at the Lender who receive any Information regarding Guarantor that such information be treated as confidential; provided, however, that such Information may be disclosed (A) as required by law, (B) to officers, directors, employees, agents, partners, attorneys, auditors, accountants, engineers and other consultants of the Lender, or its successors or assigns, who need to know such Information, provided such Persons are instructed to treat such Information confidentially, (C) by the Lender to any successor or assign of such Person, (D) to any federal or state regulatory authority having jurisdiction over the Lender, or its successors or assigns, (E) to any other Person to which such delivery or

8

disclosure may be necessary or appropriate (w) in compliance with any law, rule, regulation or order applicable to the Lender, or its successors or assigns, (x) in response to any subpoena or other legal process or information investigative demand, or (y) in connection with any litigation to which the Lender, or its successors or assigns, is a party.  Guarantor agrees that Information subject to this Paragraph (iv) does not include information which (I) was publicly known, or otherwise known to the Lender, or its successors or assigns, at the time of disclosure, (II) subsequently becomes publicly known through no act of or omission by the Lender or its successors or assigns, other than through disclosure by Guarantor or by any other Person in violation of this Paragraph (iv) or  any other confidentiality arrangement and the Lender, or its successors or assigns, has knowledge of suc h violation; provided, however, that in the event the disclosing Person shall reasonably endeavor to notify Guarantor thereof as soon as possible after such disclosure has been made and Guarantor shall be afford an opportunity to seek protective orders, or such other confidential treatment of such Information as Guarantor may deem reasonable.  

(v)

Certification.  All certifications required to be delivered pursuant to this Section 8(b) shall run directly to and be for the benefit of Lender and Fannie Mae.

(c)

Maintain Licenses.  Guarantor shall procure and maintain in full force and effect all licenses, Permits, charters and registrations which are material to the conduct of its business and shall abide by and satisfy all terms and conditions of all such licenses, Permits, charters and registrations.

(d)

Access to Records; Discussions With Senior Management.  To the extent permitted by law, Guarantor shall permit the Lender to:

(i)

inspect Guarantor’s books and records related to the Borrower and the Mortgaged Property;

(ii)

discuss Guarantor’s affairs, finances and accounts with Guarantor’s Senior Management or, provided that Senior Management of Guarantor has been given the opportunity by Lender to be a party to such discussions, property managers and independent public accountants;

(iii)

provided that Senior Management of Guarantor has been given the opportunity by Lender to be a party to such discussions, discuss the Mortgaged Properties’ conditions, operations or maintenance with the managers of such Mortgaged Properties and the officers and employees of Guarantor; and

(iv)

receive any other information that the Lender deems reasonably necessary or relevant in connection with the Guaranty, any Loan Document or the Guaranteed Obligations.

Notwithstanding the foregoing, prior to an Event of Default or Potential Event of Default, all inspections shall be conducted at reasonable times during normal business hours and upon reasonable notice to the Guarantor.

(e)

Inform the Lender of Material Events.  Guarantor shall promptly, but in any event within five (5) Business Days, inform the Lender in writing of any of the following (and shall deliver to the Lender copies of any related written communications, complaints, orders, judgments and other documents relating to the following) of which Guarantor has actual knowledge:

9

(i)

Defaults.  The occurrence of any Event of Default or any Potential Event of Default under any Loan Document;

(ii)

Bankruptcy Proceedings.  The commencement of any proceedings by or against Guarantor under any applicable bankruptcy, reorganization, liquidation, insolvency or other similar law now or hereafter in effect or of any proceeding in which a receiver, liquidator, trustee or other similar official is sought to be appointed for it;

(iii)

Accounting Changes.  Any material change in Guarantor’s accounting policies or financial reporting practices; and

(iv)

Restructuring of Guarantor.  Any restructuring or reorganization of any Guarantor.

(f)

ERISA.  Guarantor shall at all times remain in compliance in all material respects with all applicable provisions of ERISA and similar requirements of the PBGC.

(g)

Further Assurances.  Provided they do not materially increase the Guaranteed Obligations of Guarantor, Guarantor, at the request of the Lender, but without incurring any liability beyond the Guaranteed Obligations, shall execute and deliver and, if necessary, file or record such statements, documents, agreements, UCC financing and continuation statements and such other instruments and take such further action as the Lender from time to time may request as reasonably necessary, desirable or proper to carry out more effectively the purposes of this Guaranty or any of the other Loan Documents or to subject the Collateral to the lien and security interests of the Loan Documents or to evidence, perfect or otherwise implement, to assure the lien and security interests intended by the terms of the Loan Documents or in order to exercise or enforce its rights under the Loan Documents.

(h)

Monitoring Compliance.  Upon the request of the Lender, but without incurring any liability beyond the Guaranteed Obligations, from time to time, Guarantor shall promptly provide to the Lender such documents, certificates and other information as may be deemed reasonably necessary to enable the Lender to perform its functions under the Servicing Agreement as the same relates to the Guarantor.

Section 9.

Negative Covenants of Guarantor.

(a) Liquidation. Guarantor shall not dissolve or liquidate in whole or in part.

(b) Principal Place of Business. Guarantor shall not change its principal place of business or the location of its books and records without first giving 10 days' prior written notice to the Lender.

Section 10. Financial Covenants. Guarantor agrees and covenants with the Lender that, at all times during the Term of this Guaranty, the Net Worth of the REIT, the Guarantor and the Subsidiaries on a consolidated basis shall not be below $1,500,000,000.

Section 11.

Expenses.  Guarantor agrees to pay all reasonable costs and out-of-pocket expenses, including court costs and expenses and the reasonable fees and disbursements of legal counsel, incurred by or on behalf of Lender in connection with the enforcement of Guarantor’s obligations under this Guaranty or the protection of Lender’s rights under this Guaranty. The covenants contained in this Section shall survive the payment of the Guaranteed Obligations.

Section 12.

Condition of Borrower.  Guarantor is fully aware of the financial condition of Borrower and is executing and delivering this Guaranty based solely upon

10

Guarantor’s own independent investigation of all matters pertinent hereto and is not relying in any manner upon any representation or statement made by Lender. Guarantor represents and warrants that Guarantor is in a position to obtain, and Guarantor hereby assumes full responsibility for obtaining, any additional information concerning Borrower’s financial condition and any other matters pertinent hereto as Guarantor may desire and Guarantor is not relying upon or expecting Lender to furnish to Guarantor any information now or hereafter in Lender’s possession concerning the same or any other matter. By executing this Guaranty, Guarantor knowingly accepts the full range of risks encompassed within a contract of this type, which risks Guarantor acknowledges.

Section 13.

Further Assurances.  Guarantor agrees at any time and from time to time upon request by Lender to take, or cause to be taken, any action and to execute and deliver any additional documents which, in the reasonable opinion of Lender, may be necessary in order to assure to Lender the full benefits of this Guaranty, so long as any such action does not materially increase Guarantor’s Guaranteed Obligations hereunder or materially decrease its rights hereunder.

Section 14.

Subordination.  Guarantor hereby irrevocably and unconditionally agrees that any claims, direct or indirect, Guarantor may have by subrogation or other form of reimbursement, against Borrower or to any security or any interest therein, by virtue of this Guaranty or as a consequence of any payment made by Guarantor pursuant to this Guaranty, shall be fully subordinated in time and right of payment to the payment in full of the Guaranteed Obligations and all other obligations of Guarantor to Lender under this Guaranty.

Section 15.

No Subrogation.  Guarantor shall not have any right of subrogation against Borrower by reason of any payment by Guarantor under this Guaranty until such time as all of the Guaranteed Obligations have been satisfied in full. Nothing in the foregoing shall affect any claim which any Guarantor has against Borrower under the terms of the Organizational Documents of the Borrower.

Section 16.

Insolvency and Liability of Borrower.  So long as any of the Guaranteed Obligations is unpaid and this Guaranty is in effect, and to the extent not prohibited by the applicable bankruptcy court, Guarantor agrees to file all claims against Borrower in any bankruptcy or other proceeding in which the filing of claims is required by law in connection with indebtedness owed by Borrower to Guarantor and to assign to Lender all rights of Guarantor thereunder up to the lesser of (i) the amount of such indebtedness or (ii) the amount of the Guaranteed Obligations.  In all such cases the Person or Persons authorized to pay such claims shall pay to Lender the full amount thereof to the full extent necessary to pay the Guaranteed Obligations, and Guarantor hereby assigns to Lender all of Guarantor’s rights to all such payments to which Guarantor would otherwise be entitled. Notw ithstanding the foregoing, and except to the extent that any sums owed by Borrower to Lender under the Loan Documents shall have been fully satisfied thereby, the liability of Guarantor hereunder shall in no way be affected by

(a)

the release or discharge of Borrower in any creditors’, receivership, bankruptcy or other proceedings; or

(b)

the impairment, limitation or modification of the liability of Borrower or the estate of Borrower in bankruptcy resulting from the operation of any present or future provisions of the Bankruptcy Code or other statute or from the decision in any court.

Section 17.

Preferences, Fraudulent Conveyances, Etc.  If Lender is required to refund, or voluntarily refunds, any payment received from Borrower because such payment is or may be avoided, invalidated, declared fraudulent, set aside or determined to be void or voidable as a preference, fraudulent conveyance, impermissible setoff or a diversion of trust funds under

11

the bankruptcy laws or for any similar reason, including, without limitation, any judgment, order or decree of any court or administrative body having jurisdiction over Lender or any of its property, or any settlement or compromise of any claim effected by Lender with Borrower or other claimant (a “Rescinded Payment”), then Guarantor’s liability to Lender shall continue in full force and effect, or Guarantor’s liability to Lender shall be reinstated, as the case may be, with the same effect and to the same extent as if the Rescinded Payment had not been received by Lender (but only to the extent such Rescinded Payment was part of the Guaranteed Obligations hereunder), notwithstanding the cancellation or termination of any Note or any of the other Loan Documents. In addition, Guarantor shall pay, or reimburse Lender for, all expenses (including all reasona ble attorneys’ fees, court costs and related disbursements) incurred by Lender in the defense of any claim that a payment received by Lender in respect of all or any part of the Guaranteed Obligations from Guarantor must be refunded. The provisions of this Section shall survive the termination of this Guaranty and any satisfaction and discharge of Borrower by virtue of any payment, court order or any federal or state law.

Section 18.

Waiver.  Neither this Guaranty nor any term hereof may be changed, waived, discharged or terminated except by an instrument in writing signed by Lender and Guarantor expressly referring to this Guaranty and to the provisions so changed or limited. No such waiver shall extend to or affect any obligation not expressly waived or impair any right consequent thereon. No course of dealing or delay or omission on the part of Lender in exercising any right under this Guaranty shall operate as a waiver thereof or otherwise by prejudice thereto.

Section 19.

Notices.  All notices or other communications hereunder shall be sufficiently given and shall be deemed given when sent in the manner prescribed by the Loan Agreement addressed to the parties as follows:

As to the Guarantor:

AIMCO

Stanford Place 3

4582 South Ulster St. Parkway

Suite 1100

Denver, Colorado  80237

Attn:  Senior Vice President-Debt & Securities

with a copy to:

Ballard Spahr Andrews & Ingersoll, LLP

Seventeenth Street Plaza Building

1225 17^th Street, Suite 2300

Denver, Colorado 80202

Attn:  Gwendolyn C. Allen, Esquire

If to Lender or Fannie Mae:

As provided in the Loan Agreement.

Section 20.

Assignability by Lender.  Lender may, without notice to Guarantor, assign or transfer the Loans and the Loan Documents, in whole or in part. In such event, each and every immediate and successive assignee, transferee or holder of all or any part of the Loans and the Loan Documents shall have the right to enforce this Guaranty, by legal action or otherwise, as fully as if such assignee, transferee, or holder were by name specifically given such right and power in this Guaranty. Lender shall have an unimpaired right to enforce this Guaranty for its benefit as to so much of the Loans and the Loan Documents as Lender has not sold, assigned or transferred.

12

Section 21.

Guarantor Bound by Judgment Against Borrower.  Guarantor shall be conclusively bound, in any jurisdiction, by the judgment in any action by Lender against Borrower in connection with the Loan Documents (wherever instituted) as if Guarantor were a party to such action even if not so joined as a party.

Section 22.

Governing Law.  The provisions of Section 11.06 of the Loan Agreement (entitled Choice of Law; Consent to Jurisdiction; Waiver of Jury Trial) are hereby incorporated into this Agreement by this reference to the fullest extent as if the text of such Section were set forth in its entirety herein.

Section 23.

Invalid Provisions.  If any provision of this Guaranty or the application thereof to Guarantor or any circumstance in any jurisdiction whose laws govern this Guaranty shall, to any extent, be invalid or unenforceable under any applicable statute, regulation or rule of law, then such provision shall be deemed inoperative to the extent of such invalidity or unenforceability and shall be deemed modified to conform to such statute, regulation or rule or law. The remainder of this Guaranty and the application of any such invalid or unenforceable provision to parties, jurisdictions or circumstances other than those to whom or to which it is held invalid or unenforceable, shall not be affected by such invalidity or unenforceability nor shall such invalidity or unenforceability affect the validity or enforceability of any other provision of this Guaranty.

Section 24.

General Provisions.  This Guaranty shall be binding upon the respective successors and assigns of Guarantor, and shall inure to the benefit of Lender and its successors and assigns, including, without limitation, each successive holder of the Note. The descriptive headings of the Sections of the Guaranty have been inserted herein for convenience of reference only and shall not define or limit the provisions hereof.

ATTACHED EXHIBITS.  The following Exhibits are attached to this Instrument:

X Exhibit A Modifications to Guaranty

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]

13

IN WITNESS WHEREOF, Guarantor has signed this Guaranty under seal as of the day and year first above written.

AIMCO PROPERTIES, L.P., a Delaware limited partnership

By:

AIMCO-GP, Inc., a Delaware corporation, its general partner

By: /s/Patti K. Fielding

Patti K. Fielding

Executive Vice President and Treasurer

14

EXHIBIT A

MODIFICATIONS TO GUARANTY

The following modifications are hereby made to the text of the Guaranty that precedes this Exhibit:

1.

A new Section 25 is hereby added as follows:

“Section 25.

Additional Guaranty Relating to Bankruptcy.  

(a)

Notwithstanding any limitation on liability provided for elsewhere in this Guaranty, Guarantor hereby absolutely, unconditionally and irrevocably guarantees to Lender the full and prompt payment when due, whether at the maturity date or earlier, by reason of acceleration or otherwise, and at all times thereafter, the entire Indebtedness, in the event that:

(i)

Borrower voluntarily files for bankruptcy protection under the United States Bankruptcy Code; or

(ii)

Borrower voluntarily becomes subject to any reorganization, receivership, insolvency proceeding, or other similar proceeding pursuant to any other federal or state law affecting debtor and creditor rights; or

(iii)

an order of relief is entered against Borrower pursuant to the United States Bankruptcy Code or other federal or state law affecting debtor and creditor rights in any involuntary bankruptcy proceeding initiated or joined in by a "Related Party."  

(b)

For purposes of this Section, the term "Related Party" means:

(i)

Borrower or Guarantor; and

(ii)

any person or entity that holds, directly or indirectly, any ownership interest in or right to manage Borrower or Guarantor, including without limitation, any shareholder, member or partner of Borrower or Guarantor; and

(iii)

any person or entity in which any ownership interest (direct or indirect) or right to manage is held by Borrower, Guarantor or any partner, shareholder or member of, or any other person or entity holding an interest in, Borrower or Guarantor; and

(iv)

any other creditor of Borrower that is related by blood, marriage or adoption to Borrower, Guarantor or any partner, shareholder or member of, or any

PAGE A-1

other person or entity holding an interest in, Borrower or Guarantor.  

If Borrower, Guarantor or any Related Party has solicited creditors to initiate or participate in any proceeding referred to in this Section, regardless of whether any of the creditors solicited actually initiates or participates in the proceeding, then such proceeding shall be considered as having been initiated by a Related Party.”

_____________

INITIALS

PAGE A-2

EX-10

EXHIBIT 10.43

Prepared by, and after recording

return to:

Brian J. Iwashyna, Esquire

Troutman Sanders LLP

P.O. Box 1122

Richmond, Virginia  23218-1122

MULTIFAMILY DEED OF TRUST,

ASSIGNMENT OF RENTS

AND SECURITY AGREEMENT

(ARIZONA)

TABLE OF CONTENTS

PAGE

Forest Ridge Apartments

MULTIFAMILY DEED OF TRUST,

ASSIGNMENT OF RENTS AND

SECURITY AGREEMENT

THIS MULTIFAMILY DEED OF TRUST, ASSIGNMENT OF RENTS AND SECURITY AGREEMENT (the “Instrument”) is dated as of this 18^th day of January, 2007, by VMS NATIONAL PROPERTIES, a joint venture general partnership organized and existing under the laws of Illinois, whose address is c/o AIMCO, Stanford Place 3, 4582 South Ulster Street Parkway, Suite 1100, Denver, Colorado 80237, as trustor (“Borrower”), to STEWART TITLE GUARANTY COMPANY, as trustee (“Trustee”), for the benefit of CAPMARK FINANCE INC., a corporation organized and existing under the laws of California, whose address is 116 Welsh Road, Horsham, Pennsylvania 19044, Attn: Servicing-Executive Vice President, as beneficiary (“Lender”).

Borrower, in consideration of the Indebtedness and the trust created by this Instrument, irrevocably grants, conveys and assigns to Trustee, in trust, with power of sale, the Mortgaged Property, including the Land located in the County of Coconino, State of Arizona and described in Exhibit A attached to this Instrument.

TO SECURE TO LENDER the repayment of the Indebtedness evidenced by Borrower’s Multifamily Note payable to Lender, dated as of the date of this Instrument, and maturing as set forth in the Loan Agreement, in the principal amount of $8,667,809.00, and all renewals, extensions and modifications of the Indebtedness, and the performance of the covenants and agreements of Borrower contained in the Loan Documents.

Borrower represents and warrants that Borrower is lawfully seized of the Mortgaged Property and has the right, power and authority to grant, convey and assign the Mortgaged Property, and that the Mortgaged Property is unencumbered.  Borrower covenants that Borrower will warrant and defend generally the title to the Mortgaged Property against all claims and demands, subject to any easements and restrictions listed in a schedule of exceptions to coverage in any title insurance policy issued to Lender contemporaneously with the execution and recordation of this Instrument and insuring Lender’s interest in the Mortgaged Property.

Covenants.  Borrower and Lender covenant and agree as follows:

1.

DEFINITIONS. The following terms, when used in this Instrument (including when used in the above recitals), shall have the following meanings:

(a)

"Borrower" means all persons or entities identified as "Borrower" in the first paragraph of this Instrument, together with their successors and assigns.

(b)

"Collateral Agreement" means any separate agreement between Borrower and Lender for the purpose of establishing replacement reserves for the Mortgaged Property, establishing a fund to assure completion of repairs or improvements specified in that agreement, or assuring reduction of the outstanding principal balance of the Indebtedness if the occupancy of or income from the Mortgaged Property does not increase to a level specified in that agreement, or any other agreement or agreements between Borrower and Lender which provide for the establishment of any other fund, reserve or account.

(c)

"Environmental Permit" means any permit, license, or other authorization issued under any Hazardous Materials Law with respect to any activities or businesses conducted on or in relation to the Mortgaged Property.

(d)

"Event of Default" means the occurrence of any event listed in Section 22.

(e)

"Fixtures" means all property which is so attached to the Land or the Improvements as to constitute a fixture under applicable law, including: machinery, equipment, engines, boilers, incinerators, installed building materials; systems and equipment for the purpose of supplying or distributing heating, cooling, electricity, gas, water, air, or light; antennas, cable, wiring and conduits used in connection with radio, television, security, fire prevention, or fire detection or otherwise used to carry electronic signals; telephone systems and equipment; elevators and related machinery and equipment; fire detection, prevention and extinguishing systems and apparatus; security and access control systems and apparatus; plumbing systems; water heaters, ranges, stoves, microwave ovens, refrigerators, dishwashers, garbage disposers, washers, dryers and other appliances; light fixtures, aw nings, storm windows and storm doors; pictures, screens, blinds, shades, curtains and curtain rods; mirrors; cabinets, paneling, rugs and floor and wall coverings; fences, trees and plants; swimming pools; and exercise equipment.

(f)

"Governmental Authority" means any board, commission, department or body of any municipal, county, state or federal governmental unit, or any subdivision of any of them, that has or acquires jurisdiction over the Mortgaged Property or the use, operation or improvement of the Mortgaged Property.

(g)

"Hazardous Materials" means petroleum and petroleum products and compounds containing them, including gasoline, diesel fuel and oil; explosives; flammable materials; radioactive materials; polychlorinated biphenyls ("PCBs") and compounds containing them; lead and lead-based paint; asbestos or asbestos-containing materials in any form that is or could become friable; underground or above-ground storage tanks, whether empty or containing any substance; any substance the presence of which on the Mortgaged Property is prohibited by any federal, state or local authority; any substance that requires special handling; and any other material or substance now or in the future defined as a "hazardous substance," "hazardous material," "hazardous waste," "toxic substance," "toxic pollutant," "contaminant," or " pollutant" within the meaning of any Hazardous Materials Law.

(h)

"Hazardous Materials Laws" means all federal, state, and local laws, ordinances and regulations and standards, rules, policies and other governmental requirements, administrative rulings and court judgments and decrees in effect now or in the future and including all amendments, that relate to Hazardous Materials and apply to Borrower or to the Mortgaged Property. Hazardous Materials Laws include, but are not limited to, the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., the Toxic Substance Control Act, 15 U.S.C. Section 2601, et seq., the Clean Water Act, 33 U.S.C. Section 1251, et seq., and the Hazardous Materials Transportation Act, 49 U.S.C. Section 5101, et seq., and their state analog s.

(i)

"Impositions" and "Imposition Deposits" are defined in Section 7(a).

(j)

"Improvements" means the buildings, structures, improvements, and alterations now constructed or at any time in the future constructed or placed upon the Land, including any future replacements and additions.

(k)

"Indebtedness" means the principal of, interest on, and all other amounts due at any time under, the Note, this Instrument or any other Loan Document, including prepayment premiums, late charges, default interest, and advances as provided in Section 12 to protect the security of this Instrument.

(l)

[Intentionally omitted]

(m)

"Key Principal" means the natural person(s) or entity identified as such at the foot of this Instrument, and any person or entity who becomes a Key Principal after the date of this Instrument and is identified as such in an amendment or supplement to this Instrument.

(n)

"Land" means the land described in Exhibit A.

(o)

"Leases" means all present and future leases, subleases, licenses, concessions or grants or other possessory interests now or hereafter in force, whether oral or written, covering or affecting the Mortgaged Property, or any portion of the Mortgaged Property (including proprietary leases or occupancy agreements if Borrower is a cooperative housing corporation), and all modifications, extensions or renewals.

(p)

"Lender" means the entity identified as "Lender" in the first paragraph of this Instrument and its successors and assigns, or any subsequent holder of the Note.

(q)

"Loan Documents" means the Note, this Instrument, all guaranties, all indemnity agreements, all Collateral Agreements, O&M Programs, and any other documents now or in the future executed by Borrower, Key Principal, any guarantor or any other person in connection with the loan evidenced by the Note, as such documents may be amended from time to time.

(r)

"Loan Servicer" means the entity that from time to time is designated by Lender to collect payments and deposits and receive notices under the Note, this Instrument and any other Loan Document, and otherwise to service the loan evidenced by the Note for the benefit of Lender.  Unless Borrower receives notice to the contrary, the Loan Servicer is the entity identified as "Lender" in the first paragraph of this Instrument.

(s)

"Mortgaged Property" means all of Borrower's present and future right, title and interest in and to all of the following:

(1)

the Land;

(2)

the Improvements;

(3)

the Fixtures;

(4)

the Personalty;

(5)

all current and future rights, including air rights, development rights, zoning rights and other similar rights or interests, easements, tenements, rights-of-way, strips and gores of land, streets, alleys, roads, sewer rights, waters, watercourses, and appurtenances related to or benefitting the Land or the Improvements, or both, and all rights-of-way, streets, alleys and roads which may have been or may in the future be vacated;

(6)

all proceeds paid or to be paid by any insurer of the Land, the Improvements, the Fixtures, the Personalty or any other part of the

Mortgaged Property, whether or not Borrower obtained the insurance pursuant to Lender’s requirement;

(7)

all awards, payments and other compensation made or to be made by any municipal, state or federal authority with respect to the Land, the Improvements, the Fixtures, the Personalty or any other part of the Mortgaged Property, including any awards or settlements resulting from condemnation proceedings or the total or partial taking of the Land, the Improvements, the Fixtures, the Personalty or any other part of the Mortgaged Property under the power of eminent domain or otherwise and including any conveyance in lieu thereof;

(8)

all contracts, options and other agreements for the sale of the Land, the Improvements, the Fixtures, the Personalty or any other part of the Mortgaged Property entered into by Borrower now or in the future, including cash or securities deposited to secure performance by parties of their obligations;

(9)

all proceeds from the conversion, voluntary or involuntary, of any of the above into cash or liquidated claims, and the right to collect such proceeds;

(10)

all Rents and Leases;

(11)

all earnings, royalties, accounts receivable, issues and profits from the Land, the Improvements or any other part of the Mortgaged Property, and all undisbursed proceeds of the loan secured by this Instrument and, if Borrower is a cooperative housing corporation, maintenance charges or assessments payable by shareholders or residents;

(12)

all Imposition Deposits;

(13)

all refunds or rebates of Impositions by any municipal, state or federal authority or insurance company (other than refunds applicable to periods before the real property tax year in which this Instrument is dated);

(14)

all tenant security deposits which have not been forfeited by any tenant under any Lease; and

(15)

all names under or by which any of the above Mortgaged Property may be operated or known, and all trademarks, trade names, and goodwill relating to any of the Mortgaged Property.

(t)

"Note" means the Multifamily Note described on page 1 of this Instrument, including the Acknowledgment and Agreement of Key Principal to Personal Liability for Exceptions to Non-Recourse Liability (if any), and all schedules, riders, allonges and addenda, as such Multifamily Note may be amended from time to time.

(u)

"O&M Program" is defined in Section 18(a).

(v)

"Personalty" means all equipment, inventory, general intangibles which are used now or in the future in connection with the ownership, management or operation of the Land or the Improvements or are located on the Land or in the Improvements, including furniture,

furnishings, machinery, building materials, appliances, goods, supplies, tools, books, records (whether in written or electronic form), computer equipment (hardware and software) and other tangible personal property (other than Fixtures) which are used now or in the future in connection with the ownership, management or operation of the Land or the Improvements or are located on the Land or in the Improvements, and any operating agreements relating to the Land or the Improvements, and any surveys, plans and specifications and contracts for architectural, engineering and construction services relating to the Land or the Improvements and all other intangible property and rights relating to the operation of, or used in connection with, the Land or the Improvements, including all governmental permits relating to any activities on the Land.

(w)

"Property Jurisdiction" is defined in Section 30(a).

(x)

"Rents" means all rents (whether from residential or non-residential space), revenues and other income of the Land or the Improvements, including subsidy payments received from any sources (including, but not limited to payments under any Housing Assistance Payments Contract) parking fees, laundry and vending machine income and fees and charges for food, health care and other services provided at the Mortgaged Property, whether now due, past due, or to become due, and deposits forfeited by tenants.

(y)

"Taxes" means all taxes, assessments, vault rentals and other charges, if any, general, special or otherwise, including all assessments for schools, public betterments and general or local improvements, which are levied, assessed or imposed by any public authority or quasi-public authority, and which, if not paid, will become a lien, on the Land or the Improvements.

(z)

"Transfer" means (A) a sale, assignment, transfer or other disposition (whether voluntary, involuntary or by operation of law); (B) the granting, creating or attachment of a lien, encumbrance or security interest (whether voluntary, involuntary or by operation of law); (C) the issuance or other creation of an ownership interest in a legal entity, including a partnership interest, interest in a limited liability company or corporate stock; (D) the withdrawal, retirement, removal or involuntary resignation of a partner in a partnership or a member or manager in a limited liability company; or (E) the merger, dissolution, liquidation, or consolidation of a legal entity.  "Transfer" does not include (i) a conveyance of the Mortgaged Property at a judicial or non-judicial foreclosure sale under this Instrument or (ii) the Mortgaged Property becoming part of a bankruptcy estate by operation of law under the United States Bankruptcy Code.  For purposes of defining the term "Transfer," the term "partnership" shall mean a general partnership, a limited partnership, a joint venture and a limited liability partnership, and the term "partner" shall mean a general partner, a limited partner and a joint venturer.

2.

UNIFORM COMMERCIAL CODE SECURITY AGREEMENT.  This Instrument is also a security agreement under the Uniform Commercial Code for any of the Mortgaged Property which, under applicable law, may be subject to a security interest under the Uniform Commercial Code, whether acquired now or in the future, and all products and cash and non-cash proceeds thereof (collectively, "UCC Collateral"), and Borrower hereby grants to Lender a security interest in the UCC Collateral.  Borrower hereby authorizes Lender to file financing statements, continuation statements and financing statement amendments, in such form as Lender may require to perfect or continue the perfection of this security interest and Borrower agrees, if Lender so requests, to execute and deliver to Lender such financing statements, continuation statements and amendments.  Borr ower shall pay all filing costs and all costs and expenses of any record searches for financing statements that Lender may require.  Without the prior written consent of Lender, Borrower shall not create or permit to exist any other lien or security interest in any of the UCC Collateral.  If an Event of Default has occurred and is continuing, Lender shall have the remedies of a secured party under the Uniform Commercial

Code, in addition to all remedies provided by this Instrument or existing under applicable law.  In exercising any remedies, Lender may exercise its remedies against the UCC Collateral separately or together, and in any order, without in any way affecting the availability of Lender's other remedies.  This Instrument constitutes a financing statement with respect to any part of the Mortgaged Property which is or may become a Fixture.

3.

ASSIGNMENT OF RENTS; APPOINTMENT OF RECEIVER; LENDER IN POSSESSION.

(a)

As part of the consideration for the Indebtedness, Borrower absolutely and unconditionally assigns and transfers to Lender all Rents. It is the intention of Borrower to establish a present, absolute and irrevocable transfer and assignment to Lender of all Rents and to authorize and empower Lender to collect and receive all Rents without the necessity of further action on the part of Borrower.  Promptly upon request by Lender, Borrower agrees to execute and deliver such further assignments as Lender may from time to time require.  Borrower and Lender intend this assignment of Rents to be immediately effective and to constitute an absolute present assignment and not an assignment for additional security only.  For purposes of giving effect to this absolute assignment of Rents, and for no other purpose, Rents shall not be deemed to be a part of the "Mortgaged Property," as t hat term is defined in Section 1(s).  However, if this present, absolute and unconditional assignment of Rents is not enforceable by its terms under the laws of the Property Jurisdiction, then the Rents shall be included as a part of the Mortgaged Property and it is the intention of the Borrower that in this circumstance this Instrument create and perfect a lien on Rents in favor of Lender, which lien shall be effective as of the date of this Instrument.

(b)

After the occurrence of an Event of Default, Borrower authorizes Lender to collect, sue for and compromise Rents and directs each tenant of the Mortgaged Property to pay all Rents to, or as directed by, Lender, and Borrower shall, upon Borrower’s receipt of any Rents from any sources (including, but not limited to subsidy payments under any Housing Assistance Payments Contract), pay the total amount of such receipts to the Lender.  However, until the occurrence of an Event of Default, Lender hereby grants to Borrower a revocable license to collect and receive all Rents, to hold all Rents in trust for the benefit of Lender and to apply all Rents to pay the installments of interest and principal then due and payable under the Note and the other amounts then due and payable under the other Loan Documents, including Imposition Deposits, and to pay the current costs and expenses of managing, operating and maintaining the Mortgaged Property, including utilities, Taxes and insurance premiums (to the extent not included in Imposition Deposits), tenant improvements and other capital expenditures.  So long as no Event of Default has occurred and is continuing, the Rents remaining after application pursuant to the preceding sentence may be retained by Borrower free and clear of, and released from, Lender's rights with respect to Rents under this Instrument.  From and after the occurrence of an Event of Default, and without the necessity of Lender entering upon and taking and maintaining control of the Mortgaged Property directly, or by a receiver, Borrower’s license to collect Rents shall automatically terminate and Lender shall without notice be entitled to all Rents as they become due and payable, including Rents then due and unpaid.  Borrower shall pay to Lender upon demand all Rents to which Lender is entitled.  At any time on or after the date of Lender’s demand for Rents, Lender may give, and Borrower hereby irrevocably authorizes Lender to give, notice to all tenants of the Mortgaged Property instructing them to pay all Rents to Lender, no tenant shall be obligated to inquire further as to the occurrence or continuance of an Event of Default, and no tenant shall be obligated to pay to Borrower any amounts which are actually paid to Lender in response to such a notice.  Any such notice by Lender shall be delivered to each tenant personally, by mail or by delivering such demand to each rental unit.  Borrower shall not interfere with and shall cooperate with Lender's collection of such Rents.

(c)

Borrower represents and warrants to Lender that Borrower has not executed any prior assignment of Rents (other than an assignment of Rents securing indebtedness that will be paid off and discharged with the proceeds of the loan evidenced by the Note), that Borrower has not performed, and Borrower covenants and agrees that it will not perform, any acts and has not executed, and shall not execute, any instrument which would prevent Lender from exercising its rights under this Section 3, and that at the time of execution of this Instrument there has been no anticipation or prepayment of any Rents for more than two months prior to the due dates of such Rents.  Borrower shall not collect or accept payment of any Rents more than two months prior to the due dates of such Rents.

(d)

If an Event of Default has occurred and is continuing, Lender may, regardless of the adequacy of Lender's security or the solvency of Borrower and even in the absence of waste, enter upon and take and maintain full control of the Mortgaged Property in order to perform all acts that Lender in its discretion determines to be necessary or desirable for the operation and maintenance of the Mortgaged Property, including the execution, cancellation or modification of Leases, the collection of all Rents, the making of repairs to the Mortgaged Property and the execution or termination of contracts providing for the management, operation or maintenance of the Mortgaged Property, for the purposes of enforcing the assignment of Rents pursuant to Section 3(a), protecting the Mortgaged Property or the security of this Instrument, or for such other purposes as Lender in its discretion may deem necessary or des irable.  Alternatively, if an Event of Default has occurred and is continuing, regardless of the adequacy of Lender's security, without regard to Borrower’s solvency and without the necessity of giving prior notice (oral or written) to Borrower, Lender may apply to any court having jurisdiction for the appointment of a receiver for the Mortgaged Property to take any or all of the actions set forth in the preceding sentence.  If Lender elects to seek the appointment of a receiver for the Mortgaged Property at any time after an Event of Default has occurred and is continuing, Borrower, by its execution of this Instrument, expressly consents to the appointment of such receiver, including the appointment of a receiver ex parte if permitted by applicable law.  Lender or the receiver, as the case may be, shall be entitled to receive a reasonable fee for managing the Mortgaged Property.  Immediately upon appointment of a receiver or immediately upon the Lender's entering upon and tak ing possession and control of the Mortgaged Property, Borrower shall surrender possession of the Mortgaged Property to Lender or the receiver, as the case may be, and shall deliver to Lender or the receiver, as the case may be, all documents, records (including records on electronic or magnetic media), accounts, surveys, plans, and specifications relating to the Mortgaged Property and all security deposits and prepaid Rents.  In the event Lender takes possession and control of the Mortgaged Property, Lender may exclude Borrower and its representatives from the Mortgaged Property.  Borrower acknowledges and agrees that the exercise by Lender of any of the rights conferred under this Section 3 shall not be construed to make Lender a mortgagee-in-possession of the Mortgaged Property so long as Lender has not itself entered into actual possession of the Land and Improvements.

(e)

If Lender enters the Mortgaged Property, Lender shall be liable to account only to Borrower and only for those Rents actually received.  Lender shall not be liable to Borrower, anyone claiming under or through Borrower or anyone having an interest in the Mortgaged Property, by reason of any act or omission of Lender under this Section 3, and Borrower hereby releases and discharges Lender from any such liability to the fullest extent permitted by law.

(f)

If the Rents are not sufficient to meet the costs of taking control of and managing the Mortgaged Property and collecting the Rents, any funds expended by Lender for such purposes shall become an additional part of the Indebtedness as provided in Section 12.

(g)

Any entering upon and taking of control of the Mortgaged Property by Lender or the receiver, as the case may be, and any application of Rents as provided in this Instrument shall

not cure or waive any Event of Default or invalidate any other right or remedy of Lender under applicable law or provided for in this Instrument.

4.

ASSIGNMENT OF LEASES; LEASES AFFECTING THE MORTGAGED PROPERTY.

(a)

As part of the consideration for the Indebtedness, Borrower absolutely and unconditionally assigns and transfers to Lender all of Borrower's right, title and interest in, to and under the Leases, including Borrower's right, power and authority to modify the terms of any such Lease, or extend or terminate any such Lease.   It is the intention of Borrower to establish a present, absolute and irrevocable transfer and assignment to Lender of all of Borrower’s right, title and interest in, to and under the Leases.  Borrower and Lender intend this assignment of the Leases to be immediately effective and to constitute an absolute present assignment and not an assignment for additional security only.  For purposes of giving effect to this absolute assignment of the Leases, and for no other purpose, the Leases shall not be deemed to be a part of the “Mortgaged Property,” as that term is defined in Section 1(s).  However, if this present, absolute and unconditional assignment of the Leases is not enforceable by its terms under the laws of the Property Jurisdiction, then the Leases shall be included as a part of the Mortgaged Property and it is the intention of the Borrower that in this circumstance this Instrument create and perfect a lien on the Leases in favor of Lender, which lien shall be effective as of the date of this Instrument.

(b)

Until Lender gives notice to Borrower of Lender's exercise of its rights under this Section 4, Borrower shall have all rights, power and authority granted to Borrower under any Lease (except as otherwise limited by this Section or any other provision of this Instrument), including the right, power and authority to modify the terms of any Lease or extend or terminate any Lease.  Upon the occurrence of an Event of Default, the permission given to Borrower pursuant to the preceding sentence to exercise all rights, power and authority under Leases shall automatically terminate.  Borrower shall comply with and observe Borrower's obligations under all Leases, including Borrower's obligations pertaining to the maintenance and disposition of tenant security deposits.

(c)

Borrower acknowledges and agrees that the exercise by Lender, either directly or by a receiver, of any of the rights conferred under this Section 4 shall not be construed to make Lender a mortgagee-in-possession of the Mortgaged Property so long as Lender has not itself entered into actual possession of the Land and the Improvements.  The acceptance by Lender of the assignment of the Leases pursuant to Section 4(a) shall not at any time or in any event obligate Lender to take any action under this Instrument or to expend any money or to incur any expenses.  Lender shall not be liable in any way for any injury or damage to person or property sustained by any person or persons, firm or corporation in or about the Mortgaged Property.  Prior to Lender's actual entry into and taking possession of the Mortgaged Property, Lender shall not (i) be obligated to perform any of the t erms, covenants and conditions contained in any Lease (or otherwise have any obligation with respect to any Lease); (ii) be obligated to appear in or defend any action or proceeding relating to the Lease or the Mortgaged Property; or (iii) be responsible for the operation, control, care, management or repair of the Mortgaged Property or any portion of the Mortgaged Property.  The execution of this Instrument by Borrower shall constitute conclusive evidence that all responsibility for the operation, control, care, management and repair of the Mortgaged Property is and shall be that of Borrower, prior to such actual entry and taking of possession.

(d)

Upon delivery of notice by Lender to Borrower of Lender's exercise of Lender's rights under this Section 4 at any time after the occurrence of an Event of Default, and without the necessity of Lender entering upon and taking and maintaining control of the Mortgaged Property directly, by a receiver, or by any other manner or proceeding permitted by the laws of

the Property Jurisdiction, Lender immediately shall have all rights, powers and authority granted to Borrower under any Lease, including the right, power and authority to modify the terms of any such Lease, or extend or terminate any such Lease.

(e)

Borrower shall, promptly upon Lender's request, deliver to Lender an executed copy of each residential Lease then in effect. All Leases for residential dwelling units shall be on forms approved by Lender, shall be for initial terms of at least six months and not more than two years, and shall not include options to purchase.  If customary in the applicable market, residential Leases with terms of less than six months may be permitted with Lender’s prior written consent.

(f)

Borrower shall not lease any portion of the Mortgaged Property for non-residential use except with the prior written consent of Lender and Lender's prior written approval of the Lease agreement.  Borrower shall not modify the terms of, or extend or terminate, any Lease for non-residential use (including any Lease in existence on the date of this Instrument) without the prior written consent of Lender.  Borrower shall, without request by Lender, deliver an executed copy of each non-residential Lease to Lender promptly after such Lease is signed.  All non-residential Leases, including renewals or extensions of existing Leases, shall specifically provide that (1) such Leases are subordinate to the lien of this Instrument (unless waived in writing by Lender); (2) the tenant shall attorn to Lender and any purchaser at a foreclosure sale, such attornment to be self-executing and effectiv e upon acquisition of title to the Mortgaged Property by any purchaser at a foreclosure sale or by Lender in any manner; (3) the tenant agrees to execute such further evidences of attornment as Lender or any purchaser at a foreclosure sale may from time to time request; (4) the Lease shall not be terminated by foreclosure or any other transfer of the Mortgaged Property; (5) after a foreclosure sale of the Mortgaged Property, Lender or any other purchaser at such foreclosure sale may, at Lender's or such purchaser's option, accept or terminate such Lease; and (6) the tenant shall, upon receipt after the occurrence of an Event of Default of a written request from Lender, pay all Rents payable under the Lease to Lender.

(g)

Borrower shall not receive or accept Rent under any Lease (whether residential or non-residential) for more than two months in advance.

5.

PAYMENT OF INDEBTEDNESS; PERFORMANCE UNDER LOAN DOCUMENTS; PREPAYMENT PREMIUM.  Borrower shall pay the Indebtedness when due in accordance with the terms of the Note and the other Loan Documents and shall perform, observe and comply with all other provisions of the Note and the other Loan Documents.  Borrower shall pay a prepayment premium in connection with certain prepayments of the Indebtedness, including a payment made after Lender's exercise of any right of acceleration of the Indebtedness, as provided in the Note.

6.

EXCULPATION.  Borrower’s personal liability for payment of the Indebtedness and for performance of the other obligations to be performed by it under this Instrument is limited in the manner, and to the extent, provided in the Note.

7.

DEPOSITS FOR TAXES, INSURANCE AND OTHER CHARGES.

(a)

Borrower shall deposit with Lender on the day monthly installments of principal or interest, or both, are due under the Note (or on another day designated in writing by Lender), until the Indebtedness is paid in full, an additional amount sufficient to accumulate with Lender the entire sum required to pay, when due (1) any water and sewer charges which, if not paid, may result in a lien on all or any part of the Mortgaged Property, (2) the premiums for fire and other hazard insurance, rent loss insurance and such other insurance as Lender may require under Section 19, (3) Taxes, and (4) amounts for other charges and expenses which Lender at any time

reasonably deems necessary to protect the Mortgaged Property, to prevent the imposition of liens on the Mortgaged Property, or otherwise to protect Lender's interests, all as reasonably estimated from time to time by Lender.  The amounts deposited under the preceding sentence are collectively referred to in this Instrument as the "Imposition Deposits".  The obligations of Borrower for which the Imposition Deposits are required are collectively referred to in this Instrument as "Impositions".  The amount of the Imposition Deposits shall be sufficient to enable Lender to pay each Imposition before the last date upon which such payment may be made without any penalty or interest charge being added.  Lender shall maintain records indicating how much of the monthly Imposition Deposits and how much of the aggregate Imposition Deposits held b y Lender are held for the purpose of paying Taxes, insurance premiums and each other obligation of Borrower for which Imposition Deposits are required.  Any waiver by Lender of the requirement that Borrower remit Imposition Deposits to Lender may be revoked by Lender, in Lender's discretion, at any time upon notice to Borrower.

(b)

Imposition Deposits shall be held in an institution (which may be Lender, if Lender is such an institution) whose deposits or accounts are insured or guaranteed by a federal agency.  Lender shall not be obligated to open additional accounts or deposit Imposition Deposits in additional institutions when the amount of the Imposition Deposits exceeds the maximum amount of the federal deposit insurance or guaranty.  Lender shall apply the Imposition Deposits to pay Impositions so long as no Event of Default has occurred and is continuing.  Unless applicable law requires, Lender shall not be required to pay Borrower any interest, earnings or profits on the Imposition Deposits.  Borrower hereby pledges and grants to Lender a security interest in the Imposition Deposits as additional security for all of Borrower's obligations under this Instrument and the other Loan Documents.   Any amounts deposited with Lender under this Section 7 shall not be trust funds, nor shall they operate to reduce the Indebtedness, unless applied by Lender for that purpose under Section 7(e).

(c)

If Lender receives a bill or invoice for an Imposition, Lender shall pay the Imposition from the Imposition Deposits held by Lender.  Lender shall have no obligation to pay any Imposition to the extent it exceeds Imposition Deposits then held by Lender.  Lender may pay an Imposition according to any bill, statement or estimate from the appropriate public office or insurance company without inquiring into the accuracy of the bill, statement or estimate or into the validity of the Imposition.

(d)

If at any time the amount of the Imposition Deposits held by Lender for payment of a specific Imposition exceeds the amount reasonably deemed necessary by Lender, the excess shall be credited against future installments of Imposition Deposits.  If at any time the amount of the Imposition Deposits held by Lender for payment of a specific Imposition is less than the amount reasonably estimated by Lender to be necessary, Borrower shall pay to Lender the amount of the deficiency within 15 days after notice from Lender.

(e)

If an Event of Default has occurred and is continuing, Lender may apply any Imposition Deposits, in any amounts and in any order as Lender determines, in Lender's discretion, to pay any Impositions or as a credit against the Indebtedness. Upon payment in full of the Indebtedness, Lender shall refund to Borrower any Imposition Deposits held by Lender.

8.

COLLATERAL AGREEMENTS.  Borrower shall deposit with Lender such amounts as may be required by any Collateral Agreement and shall perform all other obligations of Borrower under each Collateral Agreement.

9.

APPLICATION OF PAYMENTS.  If at any time Lender receives, from Borrower or otherwise, any amount applicable to the Indebtedness which is less than all amounts due and payable at such time, then Lender may apply that payment to amounts then due and payable in any manner and in any order determined by Lender, in Lender's discretion.  Neither

Lender's acceptance of an amount which is less than all amounts then due and payable nor Lender's application of such payment in the manner authorized shall constitute or be deemed to constitute either a waiver of the unpaid amounts or an accord and satisfaction.  Notwithstanding the application of any such amount to the Indebtedness, Borrower’s obligations under this Instrument and the Note shall remain unchanged.

10.

COMPLIANCE WITH LAWS.  Borrower shall comply with all laws, ordinances, regulations and requirements of any Governmental Authority and all recorded lawful covenants and agreements relating to or affecting the Mortgaged Property, including all laws, ordinances, regulations, requirements and covenants pertaining to health and safety, construction of improvements on the Mortgaged Property, fair housing, zoning and land use, and Leases.  Borrower also shall comply with all applicable laws that pertain to the maintenance and disposition of tenant security deposits.  Borrower shall at all times maintain records sufficient to demonstrate  compliance with the provisions of this Section 10.  Borrower shall take appropriate measures to prevent, and shall not engage in or knowingly permit, any illegal activities at the Mortgaged Property that could endanger tenants or visitors, result in damage to the Mortgaged Property, result in forfeiture of the Mortgaged Property, or otherwise materially impair the lien created by this Instrument or Lender's interest in the Mortgaged Property.  Borrower represents and warrants to Lender that no portion of the Mortgaged Property has been or will be purchased with the proceeds of any illegal activity.

11.

USE OF PROPERTY.  Unless required by applicable law, Borrower shall not (a) except for any change in use approved by Lender, allow changes in the use for which all or any part of the Mortgaged Property is being used at the time this Instrument was executed, (b) convert any individual dwelling units or common areas to commercial use, (c) initiate or acquiesce in a change in the zoning classification of the Mortgaged Property, or (d) establish any condominium or cooperative regime with respect to the Mortgaged Property.

12.

PROTECTION OF LENDER'S SECURITY.

(a)

If Borrower fails to perform any of its obligations under this Instrument or any other Loan Document, or if any action or proceeding is commenced which purports to affect the Mortgaged Property, Lender's security or Lender's rights under this Instrument, including eminent domain, insolvency, code enforcement, civil or criminal forfeiture, enforcement of Hazardous Materials Laws, fraudulent conveyance or reorganizations or proceedings involving a bankrupt or decedent, then Lender at Lender's option may make such appearances, disburse such sums and take such actions as Lender reasonably deems necessary to perform such obligations of Borrower and to protect Lender's interest, including (1) payment of fees and out-of-pocket expenses of attorneys, accountants, inspectors and consultants, (2) entry upon the Mortgaged Property to make repairs or secure the Mortgaged Property, (3) procurement of the insu rance required by Section 19, and (4) payment of amounts which Borrower has failed to pay under Sections 15 and 17.

(b)

Any amounts disbursed by Lender under this Section 12, or under any other provision of this Instrument that treats such disbursement as being made under this Section 12, shall be added to, and become part of, the principal component of the Indebtedness, shall be immediately due and payable and shall bear interest from the date of disbursement until paid at the "Default Rate", as defined in the Note.

(c)

Nothing in this Section 12 shall require Lender to incur any expense or take any action.

13.

INSPECTION.  Lender, its agents, representatives, and designees may make or cause to be made entries upon and inspections of the Mortgaged Property (including

environmental inspections and tests) during normal business hours, or at any other reasonable time.

14.

BOOKS AND RECORDS; FINANCIAL REPORTING.

(a)

Borrower shall keep and maintain at all times at the Mortgaged Property or the management agent's offices, and upon Lender's request shall make available at the Mortgaged Property, complete and accurate books of account and records (including copies of supporting bills and invoices) adequate to reflect correctly the operation of the Mortgaged Property, and copies of all written contracts, Leases, and other instruments which affect the Mortgaged Property.  The books, records, contracts, Leases and other instruments shall be subject to examination and inspection at any reasonable time by Lender.

(b)

Borrower shall furnish to Lender all of the following:

(1)

within 120 days after the end of each fiscal year of Borrower, a statement of income and expenses for Borrower's operation of the Mortgaged Property for that fiscal year, a statement of changes in financial position of Borrower relating to the Mortgaged Property for that fiscal year and, when requested by Lender, a balance sheet showing all assets and liabilities of Borrower relating to the Mortgaged Property as of the end of that fiscal year;

(2)

within 120 days after the end of each fiscal year of Borrower, and at any other time upon Lender's request, a rent schedule for the Mortgaged Property showing the name of each tenant, and for each tenant, the space occupied, the lease expiration date, the rent payable for the current month, the date through which rent has been paid, and any related information requested by Lender;

(3)

within 120 days after the end of each fiscal year of Borrower, and at any other time upon Lender's request, an accounting of all security deposits held pursuant to all Leases, including the name of the institution (if any) and the names and identification numbers of the accounts (if any) in which such security deposits are held and the name of the person to contact at such financial institution, along with any authority or release necessary for Lender to access information regarding such accounts;

(4)

within 120 days after the end of each fiscal year of Borrower, and at any other time upon Lender's request, a statement that identifies all owners of any interest in Borrower and the interest held by each, if Borrower is a corporation, all officers and directors of Borrower, and if Borrower is a limited liability company, all managers who are not members;

(5)

upon Lender's request, a monthly property management report for the Mortgaged Property, showing the number of inquiries made and rental applications received from tenants or prospective tenants and deposits received from tenants and any other information requested by Lender;

(6)

upon Lender's request, a balance sheet, a statement of income and expenses for Borrower and a statement of changes in financial position of Borrower for Borrower's most recent fiscal year; and

(7)

if required by Lender, a statement of income and expense for the Mortgaged Property for the prior month or quarter.

(c)

Each of the statements, schedules and reports required by Section 14(b) shall be certified to be complete and accurate by an individual having authority to bind Borrower, and shall be in such form and contain such detail as Lender may reasonably require.  Lender also may require that any statements, schedules or reports be audited at Borrower's expense by independent certified public accountants acceptable to Lender.

(d)

If Borrower fails to provide in a timely manner the statements, schedules and reports required by Section 14(b), Lender shall have the right to have Borrower's books and records audited, at Borrower’s expense, by independent certified public accountants selected by Lender in order to obtain such statements, schedules and reports, and all related costs and expenses of Lender shall become immediately due and payable and shall become an additional part of the Indebtedness as provided in Section 12.

(e)

If an Event of Default has occurred and is continuing, Borrower shall deliver to Lender upon written demand all books and records relating to the Mortgaged Property or its operation.

(f)

Borrower authorizes Lender to obtain a credit report on Borrower at any time.

(g)

If an Event of Default has occurred and Lender has not previously required Borrower to furnish a quarterly statement of income and expense for the Mortgaged Property, Lender may require Borrower to furnish such a statement within 45 days after the end of each fiscal quarter of Borrower following such Event of Default.

15.

TAXES; OPERATING EXPENSES.

(a)

Subject to the provisions of Section 15(c) and Section 15(d), Borrower shall pay, or cause to be paid, all Taxes when due and before the addition of any interest, fine, penalty  or cost for nonpayment.  

(b)

Subject to the provisions of Section 15(c), Borrower shall pay the expenses of operating, managing, maintaining and repairing the Mortgaged Property (including insurance premiums, utilities, repairs and replacements) before the last date upon which each such payment may be made without any penalty or interest charge being added.

(c)

As long as no Event of Default exists and Borrower has timely delivered to Lender any bills or premium notices that it has received, Borrower shall not be obligated to pay Taxes, insurance premiums or any other individual Imposition to the extent that sufficient Imposition Deposits are held by Lender for the purpose of paying that specific Imposition.  If an Event of Default exists, Lender may exercise any rights Lender may have with respect to Imposition Deposits without regard to whether Impositions are then due and payable.  Lender shall have no liability to Borrower for failing to pay any Impositions to the extent that any Event of Default has occurred and is continuing, insufficient Imposition Deposits are held by Lender at the time an Imposition becomes due and payable or Borrower has failed to provide Lender with bills and premium notices as provided above.

(d)

Borrower, at its own expense, may contest by appropriate legal proceedings, conducted diligently and in good faith, the amount or validity of any Imposition other than insurance premiums, if (1) Borrower notifies Lender of the commencement or expected commencement of such proceedings, (2) the Mortgaged Property is not in danger of being sold or forfeited, (3) Borrower deposits with Lender reserves sufficient to pay the contested

Imposition, if requested by Lender, and (4) Borrower furnishes whatever additional security is required in the proceedings or is reasonably requested by Lender, which may include the delivery to Lender of the reserves established by Borrower to pay the contested Imposition.

(e)

Borrower shall promptly deliver to Lender a copy of all notices of, and invoices for, Impositions, and if Borrower pays any Imposition directly, Borrower shall promptly furnish to Lender receipts evidencing such payments.

16.

LIENS; ENCUMBRANCES.  Borrower acknowledges that, to the extent provided in Section 21, the grant, creation or existence of any mortgage, deed of trust, deed to secure debt, security interest or other lien or encumbrance (a "Lien") on the Mortgaged Property (other than the lien of this Instrument) or on certain ownership interests in Borrower, whether voluntary, involuntary or by operation of law, and whether or not such Lien has priority over the lien of this Instrument, is a "Transfer" which constitutes an Event of Default.

17.

PRESERVATION, MANAGEMENT AND MAINTENANCE OF MORTGAGED PROPERTY.  

(a)

Borrower (1) shall not commit waste or permit impairment or deterioration of the Mortgaged Property, (2) shall not abandon the Mortgaged Property, (3) shall restore or repair promptly, in a good and workmanlike manner, any damaged part of the Mortgaged Property to the equivalent of its original condition, or such other condition as Lender may approve in writing, whether or not insurance proceeds or condemnation awards are available to cover any costs of such restoration or repair, (4) shall keep the Mortgaged Property in good repair, including the replacement of Personalty and Fixtures with items of equal or better function and quality, (5) shall provide for professional management of the Mortgaged Property by a residential rental property manager satisfactory to Lender under a contract approved by Lender in writing, and (6) shall give notice to Lender of and, unless otherwise directed in writing by Lender, shall appear in and defend any action or proceeding purporting to affect the Mortgaged Property, Lender's security or Lender's rights under this Instrument.  Borrower shall not (and shall not permit any tenant or other person to) remove, demolish or alter the Mortgaged Property or any part of the Mortgaged Property except in connection with the replacement of tangible Personalty.

(b)

If, in connection with the making of the loan evidenced by the Note or at any later date, Lender waives in writing the requirement of Section 17(a)(5) above that Borrower enter into a written contract for management of the Mortgaged Property and if, after the date of this Instrument, Borrower intends to change the management of the Mortgaged Property, Lender shall have the right to approve such new property manager and the written contract for the management of the Mortgaged Property and require that Borrower and such new property manager enter into an Assignment of Management Agreement on a form approved by Lender.  If required by Lender (whether before or after an Event of Default), Borrower will cause any Affiliate of Borrower to whom fees are payable for the management of the Mortgaged Property to enter into an agreement with Lender, in a form approved by Lender, providing for subordinat ion of those fees and such other provisions as Lender may require.  "Affiliate of Borrower" means any corporation, partnership, joint venture, limited liability company, limited liability partnership, trust or individual controlled by, under common control with, or which controls Borrower (the term "control" for these purposes shall mean the ability, whether by the ownership of shares or other equity interests, by contract or otherwise, to elect a majority of the directors of a corporation, to make management decisions on behalf of, or independently to select the managing partner of, a partnership, or otherwise to have the power independently to remove and then select a majority of those individuals exercising managerial authority over an entity, and control shall be conclusively presumed in the case of the ownership of 50% or more of the equity interests).

18.

ENVIRONMENTAL HAZARDS.

(a)

Except for matters covered by a written program of operations and maintenance approved in writing by Lender (an "O&M Program") or matters described in Section 18(b), Borrower shall not cause or permit any of the following:

(1)

the presence, use, generation, release, treatment, processing, storage (including storage in above ground and underground storage tanks), handling, or disposal of any Hazardous Materials on or under the Mortgaged Property or any other  property of Borrower that is adjacent to the Mortgaged Property;

(2)

the transportation of any Hazardous Materials to, from, or across the Mortgaged Property;

(3)

any occurrence or condition on the Mortgaged Property or any other property of Borrower that is adjacent to the Mortgaged Property, which occurrence or condition is or may be in violation of Hazardous Materials Laws; or

(4)

any violation of or noncompliance with the terms of any Environmental Permit with respect to the Mortgaged Property or any  property of Borrower that is adjacent to the Mortgaged Property.

The matters described in clauses (1) through (4) above are referred to collectively in this Section 18 as "Prohibited Activities or Conditions".

(b)

Prohibited Activities and Conditions shall not include the safe and lawful use and storage of quantities of (1) pre-packaged supplies, cleaning materials and petroleum products customarily used in the operation and maintenance of comparable multifamily properties, (2) cleaning materials, personal grooming items and other items sold in pre-packaged containers for consumer use and used by tenants and occupants of residential dwelling units in the Mortgaged Property; and (3) petroleum products used in the operation and maintenance of motor vehicles from time to time located on the Mortgaged Property’s parking areas, so long as all of the foregoing are used, stored, handled, transported and disposed of in compliance with Hazardous Materials Laws.

(c)

Borrower shall take all commercially reasonable actions (including the inclusion of appropriate provisions in any Leases executed after the date of this Instrument) to prevent its employees, agents, and contractors, and all tenants and other occupants from causing or permitting any Prohibited Activities or Conditions.  Borrower shall not lease or allow the sublease or use of all or any portion of the Mortgaged Property to any tenant or subtenant for nonresidential use by any user that, in the ordinary course of its business, would cause or permit any Prohibited Activity or Condition.

(d)

If an O&M Program has been established with respect to Hazardous Materials, Borrower shall comply in a timely manner with, and cause all employees, agents, and contractors of Borrower and any other persons present on the Mortgaged Property to comply with the O&M Program.  All costs of performance of Borrower's obligations under any O&M Program shall be paid by Borrower, and Lender's out-of-pocket costs incurred in connection with the monitoring and review of the O&M Program and Borrower's performance shall be paid by Borrower upon demand by Lender.  Any such out-of-pocket costs of Lender which Borrower fails to pay promptly shall become an additional part of the Indebtedness as provided in Section 12.

(e)

Borrower represents and warrants to Lender that, except as previously disclosed by Borrower to Lender in writing:

(1)

Borrower has not at any time engaged in, caused or permitted any Prohibited Activities or Conditions;

(2)

to the best of Borrower's knowledge after reasonable and diligent inquiry, no Prohibited Activities or Conditions exist or have existed;

(3)

except to the extent previously disclosed by Borrower to Lender in writing, the Mortgaged Property does not now contain any underground storage tanks, and, to the best of Borrower’s knowledge after reasonable and diligent inquiry, the Mortgaged Property has not contained any underground storage tanks in the past.  If there is an underground storage tank located on the Property which has been previously disclosed by Borrower to Lender in writing, that tank complies with all requirements of Hazardous Materials Laws;

(4)

Borrower has complied with all Hazardous Materials Laws, including all requirements for notification regarding releases of Hazardous Materials.  Without limiting the generality of the foregoing, Borrower has obtained all Environmental Permits required for the operation of the Mortgaged Property in accordance with Hazardous Materials Laws now in effect and all such Environmental Permits are in full force and effect;  

(5)

no event has occurred with respect to the Mortgaged Property that constitutes, or with the passing of time or the giving of notice would constitute, noncompliance with the terms of any Environmental Permit;

(6)

there are no actions, suits, claims or proceedings pending or, to the best of Borrower’s knowledge after reasonable and diligent inquiry, threatened  that involve the Mortgaged Property and allege, arise out of, or relate to any Prohibited Activity or Condition; and

(7)

Borrower has not received any complaint, order, notice of violation or other communication from any Governmental Authority with regard to air emissions, water discharges, noise emissions or Hazardous Materials, or any other environmental, health or safety matters affecting the Mortgaged Property or any other property of Borrower that is adjacent to the Mortgaged Property.

The representations and warranties in this Section 18 shall be continuing representations and warranties that shall be deemed to be made by Borrower throughout the term of the loan evidenced by the Note, until the Indebtedness has been paid in full.

(f)

Borrower shall promptly notify Lender in writing upon the occurrence of any of  the following events:

(1)

Borrower's discovery of any Prohibited Activity or Condition;

(2)

Borrower’s receipt of or knowledge of any complaint, order, notice of violation or other communication from any Governmental Authority or other person with regard to present or future alleged Prohibited Activities or Conditions or any other environmental, health or safety matters

affecting the Mortgaged Property or any other property of Borrower that is adjacent to the Mortgaged Property; and  

(3)

any representation or warranty in this Section 18 becomes untrue after the date of this Agreement.

Any such notice given by Borrower shall not relieve Borrower of, or result in a waiver of, any obligation under this Instrument, the Note, or any other Loan Document.

(g)

Borrower shall pay promptly the costs of any environmental inspections, tests or audits ("Environmental Inspections") required by Lender in connection with any foreclosure or deed in lieu of foreclosure, or as a condition of Lender’s consent to any Transfer under Section 21, or required by Lender following a reasonable determination by Lender that Prohibited Activities or Conditions may exist.  Any such costs incurred by Lender (including the fees and out-of-pocket costs of attorneys and technical consultants whether incurred in connection with any judicial or administrative process or otherwise) which Borrower fails to pay promptly shall become an additional part of the Indebtedness as provided in Section 12.  The results of all Environmental Inspections made by Lender shall at all times remain the property of Lender and Lender shall have no obligation t o disclose or otherwise make available to Borrower or any other party such results or any other information obtained by Lender in connection with its Environmental Inspections.  Lender hereby reserves the right, and Borrower hereby expressly authorizes Lender, to make available to any party, including any prospective bidder at a foreclosure sale of the Mortgaged Property, the results of any Environmental Inspections made by Lender with respect to the Mortgaged Property.  Borrower consents to Lender notifying any party (either as part of a notice of sale or otherwise) of the results of any of Lender's Environmental Inspections.  Borrower acknowledges that Lender cannot control or otherwise assure the truthfulness or accuracy of the results of any of its Environmental Inspections and that the release of such results to prospective bidders at a foreclosure sale of the Mortgaged Property may have a material and adverse effect upon the amount which a party may bid at such sale.  Borrower agree s that Lender shall have no liability whatsoever as a result of delivering the results of any of its Environmental Inspections to any third party, and Borrower hereby releases and forever discharges Lender from any and all claims, damages, or causes of action, arising out of, connected with or incidental to the results of, the delivery of any of Lender's Environmental Inspections.

(h)

If any investigation, site monitoring, containment, clean-up, restoration or other remedial work ("Remedial Work") is necessary to comply with any Hazardous Materials Law or order of any Governmental Authority that has or acquires jurisdiction over the Mortgaged Property  or the use, operation or improvement of the Mortgaged Property under any Hazardous Materials Law, Borrower shall, by the earlier of (1) the applicable deadline required by Hazardous Materials Law or (2) 30 days after notice from Lender demanding such action, begin performing the Remedial Work, and thereafter diligently prosecute it to completion, and shall in any event complete the work by the time required by applicable Hazardous Materials Law.  If Borrower fails to begin on a timely basis or diligently prosecute any required Remedial Work, Lender may, at its option, cause the Remedial Work to be comp leted, in which case Borrower shall reimburse Lender on demand for the cost of doing so.  Any reimbursement due from Borrower to Lender shall become part of the Indebtedness as provided in Section 12.

(i)

Borrower shall cooperate with any inquiry by any Governmental Authority and shall comply with any governmental or judicial order which arises from any alleged Prohibited Activity or Condition.

(j)

Borrower shall indemnify, hold harmless and defend (i) Lender, (ii) any prior owner or holder of the Note, (iii) the Loan Servicer, (iv) any prior Loan Servicer, (v) the officers,

directors, shareholders, partners, employees and trustees of any of the foregoing, and (vi) the heirs, legal representatives, successors and assigns of each of the foregoing (collectively, the "Indemnitees") from and against all proceedings, claims, damages, penalties and costs (whether initiated or sought by Governmental Authorities or private parties), including fees and out-of-pocket expenses of attorneys and expert witnesses, investigatory fees, and remediation costs, whether incurred in connection with any judicial or administrative process or otherwise, arising directly or indirectly from any of the following:

(1)

any breach of any representation or warranty of Borrower in this Section 18;  

(2)

any failure by Borrower to perform any of its obligations under this Section 18;

(3)

the existence or alleged existence of any Prohibited Activity or Condition;

(4)

the presence or alleged presence of Hazardous Materials on or under the Mortgaged Property or any property of Borrower that is adjacent to the Mortgaged Property; and

(5)

the actual or alleged violation of any Hazardous Materials Law.  

(k)

Counsel selected by Borrower to defend Indemnitees shall be subject to the  approval of those Indemnitees.  However, any Indemnitee may elect to defend any claim or legal or administrative proceeding at the Borrower’s expense.  

(l)

Borrower shall not, without the prior written consent of those Indemnitees who are named as parties to a claim or legal or administrative proceeding (a "Claim"), settle or compromise the Claim if the settlement (1) results in the entry of any judgment that does not include as an unconditional term the delivery by the claimant or plaintiff to Lender of a written release of those Indemnitees, satisfactory in form and substance to Lender; or (2) may materially and adversely affect Lender, as determined by Lender in its discretion.

(m)

Lender agrees that the indemnity under this Section 18 shall be limited to the assets of Borrower and Lender shall not seek to recover any deficiency from any natural persons who are general partners of Borrower.

(n)

Borrower shall, at its own cost and expense, do all of the following:

(1)

pay or satisfy any judgment or decree that may be entered against any Indemnitee or Indemnitees in any legal or administrative proceeding incident to any matters against which Indemnitees are entitled to be indemnified under this Section 18;

(2)

reimburse Indemnitees for any expenses paid or incurred in connection with any matters against which Indemnitees are entitled to be indemnified under this Section 18; and

(3)

reimburse Indemnitees for any and all expenses, including fees and out-of-pocket expenses of attorneys and expert witnesses, paid or incurred in connection with the enforcement by Indemnitees of their rights under this Section 18, or in monitoring and participating in any legal or administrative proceeding.

(o)

In any circumstances in which the indemnity under this Section 18 applies, Lender may employ its own legal counsel and consultants to prosecute, defend or negotiate any claim or legal or administrative proceeding and Lender, with the prior written consent of Borrower (which shall not be unreasonably withheld, delayed or conditioned), may settle or compromise any action or legal or administrative proceeding.  Borrower shall reimburse Lender upon demand for all costs and expenses incurred by Lender, including all costs of settlements entered into in good faith, and the fees and out-of-pocket expenses of such attorneys and consultants.

(p)

The provisions of this Section 18 shall be in addition to any and all other obligations and liabilities that Borrower may have  under applicable law or under other Loan Documents, and each Indemnitee shall be entitled to indemnification under this Section 18 without regard to whether Lender or that Indemnitee has exercised any rights against the Mortgaged Property or any other security, pursued any rights against any guarantor, or pursued any other rights available under the Loan Documents or applicable law. If Borrower consists of more than one person or entity, the obligation of those persons or entities to indemnify the Indemnitees under this Section 18 shall be joint and several. The obligation of Borrower to indemnify the Indemnitees under this Section 18 shall survive any repayment or discharge of the Indebtedness, any foreclosure proceeding, any foreclosure sale, a ny delivery of any deed in lieu of foreclosure, and any release of record of the lien of this Instrument.

19.

PROPERTY AND LIABILITY INSURANCE.

(a)

Borrower shall keep the Improvements insured at all times against such hazards as Lender may from time to time require, which insurance shall include but not be limited to coverage against loss by fire and allied perils, general boiler and machinery coverage, and business income coverage.  Lender’s insurance requirements may change from time to time throughout the term of the Indebtedness.  If Lender so requires, such insurance shall also include sinkhole insurance, mine subsidence insurance, earthquake insurance, and, if the Mortgaged Property does not conform to applicable zoning or land use laws, building ordinance or law coverage.  If any of the Improvements is located in an area identified by the Federal Emergency Management Agency (or any successor to that agency) as an area having special flood hazards, and if flood insurance is available in that area, Borrower shall in sure such Improvements against loss by flood.

(b)

All premiums on insurance policies required under Section 19(a) shall be paid in the manner provided in Section 7, unless Lender has designated in writing another method of payment.  All such policies shall also be in a form approved by Lender.  All policies of property damage insurance shall include a non-contributing, non-reporting mortgage clause in favor of, and in a form approved by, Lender.  Lender shall have the right to hold the original policies or duplicate original policies of all insurance required by Section 19(a).  Borrower shall promptly deliver to Lender a copy of all renewal and other notices received by Borrower with respect to the policies and all receipts for paid premiums.  At least 30 days prior to the expiration date of a policy, Borrower shall deliver to Lender the original  (or a duplicate original) of a renewal policy in form satisfactory to Lender.

(c)

Borrower shall maintain at all times commercial general liability insurance, workers’ compensation insurance and such other liability, errors and omissions and fidelity insurance coverages as Lender may from time to time require.

(d)

All insurance policies and renewals of insurance policies required by this Section 19 shall be in such amounts and for such periods as Lender may from time to time require, and shall be issued by insurance companies satisfactory to Lender.

(e)

Borrower shall comply with all insurance requirements and shall not permit any condition to exist on the Mortgaged Property that would invalidate any part of any insurance coverage that this Instrument requires Borrower to maintain.

(f)

In the event of loss, Borrower shall give immediate written notice to the insurance carrier and to Lender.  Borrower hereby authorizes and appoints Lender as attorney-in-fact for Borrower to make proof of loss, to adjust and compromise any claims under policies of property damage insurance, to appear in and prosecute any action arising from such property damage insurance policies, to collect and receive the proceeds of property damage insurance, and to deduct from such proceeds Lender’s expenses incurred in the collection of such proceeds.  This power of attorney is coupled with an interest and therefore is irrevocable.  However, nothing contained in this Section 19 shall require Lender to incur any expense or take any action.  Lender may, at Lender’s option, (1) hold the balance of such proceeds to be used to reimburse Borrower for the cost of restoring and rep airing the Mortgaged Property to the equivalent of its original condition or to a condition approved by Lender (the "Restoration"), or (2) apply the balance of such proceeds to the payment of the Indebtedness, whether or not then due. To the extent Lender determines to apply insurance proceeds to Restoration, Lender shall do so in accordance with Lender’s then-current policies relating to the restoration of casualty damage on similar multifamily properties.

(g)

Lender shall not exercise its option to apply insurance proceeds to the payment of the Indebtedness if all of the following conditions are met:  (1) no Event of Default (or any event which, with the giving of notice or the passage of time, or both, would constitute an Event of Default) has occurred and is continuing; (2) Lender determines, in its discretion, that there will be sufficient funds to complete the Restoration; (3) Lender determines, in its discretion, that the rental income from the Mortgaged Property after completion of the Restoration will be sufficient to meet all operating costs and other expenses, Imposition Deposits, deposits to reserves and loan repayment obligations relating to the Mortgaged Property; (4) Lender determines, in its discretion, that the Restoration will be completed before the earlier of (A) one year before the maturity date of the Note or (B) one year afte r the date of the loss or casualty; and (5) upon Lender’s request, Borrower provides Lender evidence of the availability during and after the Restoration of the insurance required to be maintained by Borrower pursuant to this Section 19.

(h)

If the Mortgaged Property is sold at a foreclosure sale or Lender acquires title to the Mortgaged Property, Lender shall automatically succeed to all rights of Borrower in and to any insurance policies and unearned insurance premiums and in and to the proceeds resulting from any damage to the Mortgaged Property prior to such sale or acquisition.

20.

CONDEMNATION.

(a)

Borrower shall promptly notify Lender of any action or proceeding relating to any condemnation or other taking, or conveyance in lieu thereof, of all or any part of the Mortgaged Property, whether direct or indirect (a "Condemnation").  Borrower shall appear in and prosecute or defend any action or proceeding relating to any Condemnation unless otherwise directed by Lender in writing.  Borrower authorizes and appoints Lender as attorney-in-fact for Borrower to commence, appear in and prosecute, in Lender’s or Borrower’s name, any action or proceeding relating to any Condemnation and to settle or compromise any claim in connection with any Condemnation.  This power of attorney is coupled with an interest and therefore is irrevocable.  However, nothing contained in this Section 20 shall require Lender to incur any expense or take any action.   ;Borrower hereby transfers and assigns to Lender all right, title and interest of Borrower in and to any award or payment with respect to (i) any Condemnation, or any conveyance in lieu of Condemnation, and (ii) any damage to the Mortgaged Property caused by governmental action that does not result in a Condemnation.

(b)

Lender may apply such awards or proceeds, after the deduction of Lender’s expenses incurred in the collection of such amounts, at Lender’s option, to the restoration or repair of the Mortgaged Property or to the payment of the Indebtedness, with the balance, if any, to Borrower.  Unless Lender otherwise agrees in writing, any application of any awards or proceeds to the Indebtedness shall not extend or postpone the due date of any monthly installments referred to in the Note, Section 7 of this Instrument or any Collateral Agreement, or change the amount of such installments.  Borrower agrees to execute such further evidence of assignment of any awards or proceeds as Lender may require.

21.

TRANSFERS OF THE MORTGAGED PROPERTY OR INTERESTS IN BORROWER.

(a)

The occurrence of any of the following events shall constitute an Event of Default under this Instrument:

(1)

a Transfer of all or any part of the Mortgaged Property or any interest in the Mortgaged Property;

(2)

a Transfer of a Controlling Interest in Borrower;

(3)

a Transfer of a Controlling Interest in any entity which owns, directly or indirectly through one or more intermediate entities, a Controlling Interest in Borrower;

(4)

a Transfer of all or any part of Key Principal's ownership interests (other than limited partnership interests) in Borrower, or in any other entity which owns, directly or indirectly through one or more intermediate entities, an ownership interest in Borrower;

(5)

if Key Principal is an entity (A) a Transfer of a Controlling Interest in Key Principal, or (B) a Transfer of a Controlling Interest in any entity which owns, directly or indirectly through one or more intermediate entities, a Controlling Interest in Key Principal;

(6)

if Borrower or Key Principal is a trust, the termination or revocation of such trust; and

(7)

a conversion of Borrower from one type of legal entity into another type of legal entity, whether or not there is a Transfer.

Lender shall not be required to demonstrate any actual impairment of its security or any increased risk of default in order to exercise any of its remedies with respect to an Event of Default under this Section 21.

(b)

The occurrence of any of the following events shall not constitute an Event of Default under this Instrument, notwithstanding any provision of Section 21(a) to the contrary:

(1)

a Transfer to which Lender has consented;

(2)

a Transfer that occurs by devise, descent, or by operation of law upon the death of a natural person;

(3)

the grant of a leasehold interest in an individual dwelling unit for a term of two years or less not containing an option to purchase;

(4)

a Transfer of obsolete or worn out Personalty or Fixtures that are contemporaneously replaced by items of equal or better function and quality, which are free of liens, encumbrances and security interests other than those created by the Loan Documents or consented to by Lender;

(5)

the grant of an easement, if before the grant Lender determines that the easement will not materially affect the operation or value of the Mortgaged Property or Lender’s interest in the Mortgaged Property, and Borrower pays to Lender, upon demand, all costs and expenses incurred by Lender in connection with reviewing Borrower’s request; and

(6)

the creation of a tax lien or a mechanic’s, materialman’s or judgment lien against the Mortgaged Property which is bonded off, released of record or otherwise remedied to Lender’s satisfaction within 30 days of the date of creation.

(c)

Lender shall consent, without any adjustment to the rate at which the Indebtedness secured by this Instrument bears interest or to any other economic terms of the Indebtedness, to a Transfer that would otherwise violate this Section 21 if, prior to the Transfer, Borrower has satisfied each of the following requirements:

(1)

the submission to Lender of all information required by Lender to make the determination required by this Section 21(c);

(2)

the absence of any Event of Default;

(3)

the transferee meets all of the eligibility, credit, management and other standards (including any standards with respect to previous relationships between Lender and the transferee and the organization of the transferee) customarily applied by Lender at the time of the proposed Transfer to the approval of borrowers in connection with the origination or purchase of similar mortgages, deeds of trust or deeds to secure debt on multifamily properties;

(4)

the Mortgaged Property, at the time of the proposed Transfer, meets all standards as to its physical condition that are customarily applied by Lender at the time of the proposed Transfer to the approval of properties in connection with the origination or purchase of similar mortgages on multifamily properties;

(5)

in the case of a Transfer of all or any part of the Mortgaged Property, or direct or indirect ownership interests in Borrower or Key Principal (if an entity), if transferor or any other person has obligations under any Loan Document, the execution by the transferee or one or more individuals or entities acceptable to Lender of an assumption agreement (including, if applicable, an Acknowledgement and Agreement of Key Principal to Personal Liability for Exceptions to Non-Recourse Liability) that is acceptable to Lender and that, among other things, requires the transferee to perform all obligations of transferor or such person set forth in such Loan Document, and may require that the transferee comply with any provisions

of this Instrument or any other Loan Document which previously may have been waived by Lender;

(6)

if a guaranty has been executed and delivered in connection with the Note, this Instrument or any of the other Loan Documents, the Borrower causes one or more individuals or entities acceptable to Lender to execute and deliver to Lender a guaranty in a form acceptable to Lender; and

(7)

Lender’s receipt of all of the following:

(A)

a non-refundable review fee in the amount of $3,000 and a transfer fee equal to 1 percent of the outstanding Indebtedness immediately prior to the Transfer.

(B)

In addition, Borrower shall be required to reimburse Lender for all of Lender's out-of-pocket costs (including reasonable attorneys’ fees) incurred in reviewing the Transfer request, to the extent such expenses exceed $3,000.

(d)

For purposes of this Section, the following terms shall have the meanings set forth below:

(1)

"Initial Owners" means, with respect to Borrower or any other entity, the persons or entities who on the date of the Note own in the aggregate 100% of the ownership interests in Borrower or that entity.

(2)

A Transfer of a "Controlling Interest" shall mean, with respect to any entity, the following:

(i)

if such entity is a general partnership or a joint venture, a Transfer of any general partnership interest or joint venture interest which would cause the Initial Owners to own less than 51% of all general partnership or joint venture interests in such entity;

(ii)

if such entity is a limited partnership, a Transfer of any general partnership interest;

(iii)

if such entity is a limited liability company or a limited liability partnership, a Transfer of any membership or other ownership interest which would cause the Initial Owners to own less than 51% of all membership or other ownership interests in such entity;

(iv)

if such entity is a corporation (other than a Publicly-Held Corporation) with only one class of voting stock, a Transfer of any voting stock which would cause the Initial Owners to own less than 51% of voting stock in such corporation;

(v)

if such entity is a corporation (other than a Publicly-Held Corporation) with more than one class of voting stock, a Transfer of any voting stock which would cause the Initial Owners to own less than a sufficient number of shares of voting stock having the power to elect the majority of directors of such corporation; and

(vi)

if such entity is a trust, the removal, appointment or substitution of a trustee of such trust other than (A) in the case of a land trust, or (B) if the trustee of such trust after such removal, appointment or substitution is a trustee identified in the trust agreement approved by Lender.

(3)

"Publicly-Held Corporation" shall mean a corporation the outstanding voting stock of which is registered under Section 12(b) or 12(g) of the Securities and Exchange Act of 1934, as amended.

22.

EVENTS OF DEFAULT.  The occurrence of any one or more of the following shall constitute an Event of Default under this Instrument:

(a)

any failure by Borrower to pay or deposit when due any amount required by the Note, this Instrument or any other Loan Document;

(b)

any failure by Borrower to maintain the insurance coverage required by Section 19;

(c)

any failure by Borrower to comply with the provisions of Section 33;

(d)

fraud or material misrepresentation or material omission by Borrower, or any of its officers, directors, trustees, general partners or managers, Key Principal or any guarantor in connection with (A) the application for or creation of the Indebtedness, (B) any financial statement, rent roll, or other report or information provided to Lender during the term of the Indebtedness, or (C) any request for Lender’s consent to any proposed action, including a request for disbursement of funds under any Collateral Agreement;

(e)

any Event of Default under Section 21;

(f)

the commencement of a forfeiture action or proceeding, whether civil or criminal, which, in Lender’s reasonable judgment, could result in a forfeiture of the Mortgaged Property or otherwise materially impair the lien created by this Instrument or Lender’s interest in the Mortgaged Property;

(g)

any failure by Borrower to perform any of its obligations under this Instrument (other than those specified in Sections 22(a) through (f)), as and when required, which continues for a period of 30 days after notice of such failure by Lender to Borrower, but no such notice or grace period shall apply in the case of any such failure which could, in Lender’s judgment, absent immediate exercise by Lender of a right or remedy under this Instrument, result in harm to Lender, impairment of the Note or this Instrument or any other security given under any other Loan Document;

(h)

any failure by Borrower to perform any of its obligations as and when required under any Loan Document other than this Instrument which continues beyond the applicable cure period, if any, specified in that Loan Document; and

(i)

any exercise by the holder of any other debt instrument secured by a mortgage, deed of trust or deed to secure debt on the Mortgaged Property of a right to declare all amounts due under that debt instrument immediately due and payable.

23.

REMEDIES CUMULATIVE.  Each right and remedy provided in this Instrument is distinct from all other rights or remedies under this Instrument or any other Loan

Document or afforded by applicable law, and each shall be cumulative and may be exercised concurrently, independently, or successively, in any order.

24.

FORBEARANCE.

(a)

Lender may (but shall not be obligated to) agree with Borrower, from time to time, and without giving notice to, or obtaining the consent of, or having any effect upon the obligations of, any guarantor or other third party obligor, to take any of the following actions:  extend the time for payment of all or any part of the Indebtedness; reduce the payments due under this Instrument, the Note, or any other Loan Document; release anyone liable for the payment of any amounts under this Instrument, the Note, or any other Loan Document; accept a renewal of the Note; modify the terms and time of payment of the Indebtedness; join in any extension or subordination agreement; release any Mortgaged Property; take or release other or additional security; modify the rate of interest or period of amortization of the Note or change the amount of the monthly installments payable under the Note; and otherwi se modify this Instrument, the Note, or any other Loan Document.

(b)

Any forbearance by Lender in exercising any right or remedy under the Note, this Instrument, or any other Loan Document or otherwise afforded by applicable law, shall not be a waiver of or preclude the exercise of any other right or remedy.  The acceptance by Lender of payment of all or any part of the Indebtedness after the due date of such payment, or in an amount which is less than the required payment, shall not be a waiver of Lender’s right to require prompt payment when due of all other payments on account of the Indebtedness or to exercise any remedies for any failure to make prompt payment. Enforcement by Lender of any security for the Indebtedness shall not constitute an election by Lender of remedies so as to preclude the exercise of any other right available to Lender.  Lender’s receipt of any awards or proceeds under Sections 19 and 20 shall not operate to cure or waive any Event of Default.

25.

LOAN CHARGES.  If any applicable law limiting the amount of interest or other charges permitted to be collected from Borrower is interpreted so that any charge provided for in any Loan Document, whether considered separately or together with other charges levied in connection with any other Loan Document, violates that law, and Borrower is entitled to the benefit of that law, that charge is hereby reduced to the extent necessary to eliminate that violation.  The amounts, if any, previously paid to Lender in excess of the permitted amounts shall be applied by Lender to reduce the principal of the Indebtedness.  For the purpose of determining whether any applicable law limiting the amount of interest or other charges permitted to be collected from Borrower has been violated, all Indebtedness which constitutes interest, as well as all other charges le vied in connection with the Indebtedness which constitute interest, shall be deemed to be allocated and spread over the stated term of the Note.  Unless otherwise required by applicable law, such allocation and spreading shall be effected in such a manner that the rate of interest so computed is uniform throughout the stated term of the Note.

26.

WAIVER OF STATUTE OF LIMITATIONS.  Borrower hereby waives the right to assert any statute of limitations as a bar to the enforcement of the lien of this Instrument or to any action brought to enforce any Loan Document.

27.

WAIVER OF MARSHALLING.  Notwithstanding the existence of any other security interests in the Mortgaged Property held by Lender or by any other party, Lender shall have the right to determine the order in which any or all of the Mortgaged Property shall be subjected to the remedies provided in this Instrument, the Note, any other Loan Document or applicable law.  Lender shall have the right to determine the order in which any or all portions of the Indebtedness are satisfied from the proceeds realized upon the exercise of such remedies.  Borrower and any party who now or in the future acquires a security interest in the Mortgaged Property and who has actual or constructive notice of this Instrument waives any and all right to

require the marshalling of assets or to require that any of the Mortgaged Property be sold in the inverse order of alienation or that any of the Mortgaged Property be sold in parcels or as an entirety in connection with the exercise of any of the remedies permitted by applicable law or provided in this Instrument.

28.

FURTHER ASSURANCES.  Borrower shall execute, acknowledge, and deliver, at its sole cost and expense, all further acts, deeds, conveyances, assignments, estoppel certificates, financing statements, transfers and assurances as Lender may require from time to time in order to better assure, grant, and convey to Lender the rights intended to be granted, now or in the future, to Lender under this Instrument and the Loan Documents.

29.

ESTOPPEL CERTIFICATE.  Within 10 days after a request from Lender, Borrower shall deliver to Lender a written statement, signed and acknowledged by Borrower, certifying to Lender or any person designated by Lender, as of the date of such statement, (i) that the Loan Documents are unmodified and in full force and effect  (or, if there have been modifications, that the Loan Documents are in full force and effect as modified and setting forth such modifications); (ii) the unpaid principal balance of the Note; (iii) the date to which interest under the Note has been paid; (iv) that Borrower is not in default in paying the Indebtedness or in performing or observing any of the covenants or agreements contained in this Instrument or any of the other Loan Documents (or, if the Borrower is in default, describing such default in reasonable detail); (v) whether or not there are then existin g any setoffs or defenses known to Borrower against the enforcement of any right or remedy of Lender under the Loan Documents; and (vi) any additional facts requested by Lender.

30.

GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE.

(a)

This Instrument, and any Loan Document which does not itself expressly identify the law that is to apply to it, shall be governed by the laws of the jurisdiction in which the Land is located (the "Property Jurisdiction").

(b)

Borrower agrees that any controversy arising under or in relation to the Note, this Instrument, or any other Loan Document shall be litigated exclusively in the Property Jurisdiction.  The state and federal courts and authorities with jurisdiction in the Property Jurisdiction shall have exclusive jurisdiction over all controversies which shall arise under or in relation to the Note, any security for the Indebtedness, or any other Loan Document.  Borrower irrevocably consents to service, jurisdiction, and venue of such courts for any such litigation and waives any other venue to which it might be entitled by virtue of domicile, habitual residence or otherwise.

31.

NOTICE.

(a)

All notices, demands and other communications ("notice") under or concerning this Instrument shall be in writing.  Each notice shall be addressed to the intended recipient at its address set forth in this Instrument, and shall be deemed given on the earliest to occur of (1) the date when the notice is received by the addressee; (2) the first Business Day after the notice is delivered to a recognized overnight courier service, with arrangements made for payment of charges for next Business Day delivery; or (3) the third Business Day after the notice is deposited in the United States mail with postage prepaid, certified mail, return receipt requested.  As used in this Section 31, the term "Business Day" means any day other than a Saturday, a Sunday or any other day on which Lender is not open for business.

(b)

Any party to this Instrument may change the address to which notices intended for it are to be directed by means of notice given to the other party in accordance with this Section 31.  Each party agrees that it will not refuse or reject delivery of any notice given in

accordance with this Section 31, that it will acknowledge, in writing, the receipt of any notice upon request by the other party and that any notice rejected or refused by it shall be deemed for purposes of this Section 31 to have been received by the rejecting party on the date so refused or rejected, as conclusively established by the records of the U.S. Postal Service or the courier service.

(c)

Any notice under the Note and any other Loan Document which does not specify how notices are to be given shall be given in accordance with this Section 31.

32.

SALE OF NOTE; CHANGE IN SERVICER.  The Note or a partial interest in the Note (together with this Instrument and the other Loan Documents) may be sold one or more times without prior notice to Borrower.  A sale may result in a change of the Loan Servicer.  There also may be one or more changes of the Loan Servicer unrelated to a sale of the Note.  If there is a change of the Loan Servicer, Borrower will be given notice of the change.

33.

SINGLE ASSET BORROWER.  Until the Indebtedness is paid in full, Borrower (a) shall not acquire any real or personal property other than the Mortgaged Property and personal property related to the operation and maintenance of the Mortgaged Property;  (b) shall not operate any business other than the management and operation of the Mortgaged Property; and (c) shall not maintain its assets in a way difficult to segregate and identify.

34.

SUCCESSORS AND ASSIGNS BOUND.  This Instrument shall bind, and the rights granted by this Instrument shall inure to, the respective successors and assigns of Lender and Borrower.  However, a Transfer not permitted by Section 21 shall be an Event of Default.

35.

JOINT AND SEVERAL LIABILITY.  If more than one person or entity signs this Instrument as Borrower, the obligations of such persons and entities shall be joint and several.

36.

RELATIONSHIP OF PARTIES; NO THIRD PARTY BENEFICIARY.

(a)

The relationship between Lender and Borrower shall be solely that of creditor and debtor, respectively, and nothing contained in this Instrument shall create any other relationship between Lender and Borrower.

(b)

No creditor of any party to this Instrument and no other person shall be a third party beneficiary of this Instrument or any other Loan Document.  Without limiting the generality of the preceding sentence, (1) any arrangement (a "Servicing Arrangement") between the Lender and any Loan Servicer for loss sharing or interim advancement of funds shall constitute a contractual obligation of such Loan Servicer that is independent of the obligation of Borrower for the payment of the Indebtedness, (2) Borrower shall not be a third party beneficiary of any Servicing Arrangement, and (3) no payment by the Loan Servicer under any Servicing Arrangement will reduce the amount of the Indebtedness.

37.

SEVERABILITY; AMENDMENTS.  The invalidity or unenforceability of any provision of this Instrument shall not affect the validity or enforceability of any other provision, and all other provisions shall remain in full force and effect.  This Instrument contains the entire agreement among the parties as to the rights granted and the obligations assumed in this Instrument.  This Instrument may not be amended or modified except by a writing signed by the party against whom enforcement is sought.

38.

CONSTRUCTION.  The captions and headings of the sections of this Instrument are for convenience only and shall be disregarded in construing this Instrument.  Any reference in this Instrument to an "Exhibit" or a "Section" shall, unless otherwise explicitly provided, be

construed as referring, respectively, to an Exhibit attached to this Instrument or to a Section of this Instrument.  All Exhibits attached to or referred to in this Instrument are incorporated by reference into this Instrument.  Any reference in this Instrument to a statute or regulation shall be construed as referring to that statute or regulation as amended from time to time.  Use of the singular in this Agreement includes the plural and use of the plural includes the singular.  As used in this Instrument, the term "including" means "including, but not limited to."

39.

LOAN SERVICING.  All actions regarding the servicing of the loan evidenced by the Note, including the collection of payments, the giving and receipt of notice, inspections of the Property, inspections of books and records, and the granting of consents and approvals, may be taken by the Loan Servicer unless Borrower receives notice to the contrary.  If Borrower receives conflicting notices regarding the identity of the Loan Servicer or any other subject, any such notice from Lender shall govern.

40.

DISCLOSURE OF INFORMATION.  Lender may furnish information regarding Borrower or the Mortgaged Property to third parties with an existing or prospective interest in the servicing, enforcement, evaluation, performance, purchase or securitization of the Indebtedness, including trustees, master servicers, special servicers, rating agencies, and organizations maintaining databases on the underwriting and performance of multifamily mortgage loans.  Borrower irrevocably waives any and all rights it may have under applicable law to prohibit such disclosure, including any right of privacy.

41.

NO CHANGE IN FACTS OR CIRCUMSTANCES.  All information in the application for the loan submitted to Lender (the "Loan Application") and in all financial statements, rent rolls, reports, certificates and other documents submitted in connection with the Loan Application are complete and accurate in all material respects.  There has been no material adverse change in any fact or circumstance that would make any such information incomplete or inaccurate.

42.

SUBROGATION.  If, and to the extent that, the proceeds of the loan evidenced by the Note are used to pay, satisfy or discharge any obligation of Borrower for the payment of money that is secured by a pre-existing mortgage, deed of trust or other lien encumbering the Mortgaged Property (a "Prior Lien"), such loan proceeds shall be deemed to have been advanced by Lender at Borrower’s request, and Lender shall automatically, and without further action on its part, be subrogated to the rights, including lien priority, of the owner or holder of the obligation secured by the Prior Lien, whether or not the Prior Lien is released.

43.

ACCELERATION; REMEDIES.  At any time during the existence of an Event of Default, Lender, at Lender's option, may declare the Indebtedness to be immediately due and payable without further demand, and may invoke the power of sale and any other remedies permitted by Arizona law or provided in this Instrument or in any other Loan Document.  Borrower acknowledges that the power of sale granted in this Instrument may be exercised by Lender without prior judicial hearing.  Lender shall be entitled to collect all costs and expenses incurred in pursuing such remedies, including attorneys' fees, costs of documentary evidence, abstracts and title reports.

If Lender invokes the power of sale, Lender shall give written notice to Trustee of the occurrence of an Event of Default and of  Lender's election to cause the Mortgaged Property to be sold.  Trustee shall record a notice of sale in each county in which the Mortgaged Property or some part of the Mortgaged Property is located and shall mail copies of the notices in the manner required by Arizona law to Borrower and to all other persons entitled to receive such notice under Arizona law.  Trustee shall give public notice of the sale and shall sell the Mortgaged Property according to Arizona law.  Trustee may sell the Mortgaged Property at the time and place and under the terms designated in the notice of sale in one or more parcels and in such

order as Trustee may determine.  Trustee may postpone the sale of all or any part of the Mortgaged Property by public announcement at the time and place of any previously scheduled sale.  Lender or Lender's designee may purchase the Mortgaged Property at any sale.

Trustee shall deliver to the purchaser at the sale, within a reasonable time after the sale, a deed conveying the Mortgaged Property so sold without any expressed or implied covenant or warranty.  The recitals in Trustee's deed shall be prima facie evidence of the truth of the statements made in those recitals.  Trustee shall apply the proceeds of the sale in the following order:  (a) to all costs and expenses of the sale, including Trustee's fees and attorneys' fees and costs of title evidence; (b) to the Indebtedness in such order as Lender, in Lender's discretion, directs; and (c) the excess, if any, to the person or persons legally entitled to the excess, or to the clerk of the superior court of the county in which the sale took place.

44.

RELEASE.  Upon payment of the Indebtedness, Lender shall release this Instrument.  Borrower shall pay Lender's reasonable costs incurred in releasing this Instrument.

45.

SUBSTITUTE TRUSTEE.  Lender, at Lender's option, may from time to time remove Trustee and appoint a successor trustee.  Without conveyance of the Mortgaged Property, the successor trustee shall succeed to all the title, power and duties conferred upon the Trustee in this Instrument and by applicable law.

46.

TIME OF ESSENCE.  Time is of the essence of each covenant of this Instrument.

47.

WAIVERS BY SURETY.  Any party who has signed this Instrument as a surety or accommodation party, or who has subjected his property to this Instrument to secure the indebtedness of another, expressly waives the benefits of the provision of Arizona Revised Statutes §§ 12-1641 and 12-1642.

48.

WAIVER OF TRIAL BY JURY.  BORROWER AND LENDER EACH (A) COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS INSTRUMENT OR THE RELATIONSHIP BETWEEN THE PARTIES AS BORROWER AND LENDER THAT IS TRIABLE OF RIGHT BY A JURY AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO SUCH ISSUE TO THE EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN THE FUTURE.  THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL.

ATTACHED EXHIBITS.  The following Exhibits are attached to this Instrument:

X	Exhibit A	Description of the Land (required)
X	Exhibit B	Modifications to Instrument

IN WITNESS WHEREOF, Borrower has signed and delivered this Instrument or has caused this Instrument to be signed and delivered by its duly authorized representative.

VMS NATIONAL PROPERTIES, an Illinois joint venture general partnership

By:  VMS National Residential Portfolio I, an Illinois limited partnership, its joint venture partner

By:  Maeril, Inc., a Delaware corporation, its general partner

By:   /s/Patti K. Fielding

Patti K. Fielding

Executive Vice President and Treasurer

By:  VMS National Residential Portfolio II, an Illinois limited partnership, its joint venture partner

By:  Maeril, Inc., a Delaware corporation, its general partner

By:   /s/Patti K. Fielding

Patti K. Fielding

Executive Vice President and Treasurer

EXHIBIT A

[DESCRIPTION OF THE LAND]

EXHIBIT B

Modifications to Security Instrument

The following modifications are made to the text of the Instrument that precedes this Exhibit:

1.

Paragraph 7 is amended to add the following subparagraph:

(f)

Notwithstanding the provisions of Subparagraph 7(a), Lender will not require Borrower to deposit with Lender amounts sufficient to accumulate with Lender the entire sum required to pay Taxes, provided that Borrower delivers to Lender a letter of credit and opinion of the letter of credit issuer’s counsel, both in form and content satisfactory to Lender in its sole discretion, in an amount equal to one (1) year’s Taxes.  In the event that Borrower does not timely pay Taxes or fails to provide Lender with proof of such payment, Lender shall have the right to (i) cash the letter of credit and apply the proceeds of the same to the payment of Taxes, (ii) deposit any proceeds in excess of the amount of Taxes then due and payable into Lender’s account for Imposition Deposits and (iii) require Borrower to deposit with Lender Imposition Deposits as provided in Subpar agraph 7(a).

2.

Paragraph 18(a) is amended to add the following sections:

(5)

the presence of any form of toxic mold or fungus in the Mortgaged Property of a type which may pose a significant risk to human health or the environment or would negatively impact the value of the Mortgaged Property (collectively “Mold”);

(6)

any activity, condition, event or omission that causes the growth of Mold on or in the Mortgaged Property.

3.

The defined term “Prohibited Activities or Conditions” is amended to include the matters described in Sections 18(a)(5) and 18(a)(6).

4.

A new Section 21(a)(8) is added as follows:

(8)

if, at any time, AIMCO REIT loses the authority or the ownership interests necessary to control, either directly or indirectly, Borrower and Guarantor and Borrower’s and Grantor’s Controlling Entities (“AIMCO Authorization”), Grantor covenants to send notice of such loss of AIMCO Authorization to Lender within fifteen (15) business days.  Such loss of AIMCO Authorization, shall be deemed a Transfer hereunder, and such Transfer shall constitute an Event of Default under Section 21(a) unless AIMCO REIT regains such AIMCO Authorization within sixty (60) days after the date of the loss.

5.

Section 33 is amended by adding the following sentences at the end of such Section:

“Borrower has disclosed to and provided Lender with information relating to assets it currently owns in addition to the Mortgaged Property (the “Disclosed Assets”).  Lender acknowledges that Borrower is not a single asset entity and agrees that Borrower may continue to own and operate the Disclosed Assets until September 30, 2007.  Until the Indebtedness is paid in full, Borrower (a) shall not acquire any real or personal property other than (i) the Mortgaged Property, (ii) the Disclosed Assets, (iii) personal property related to the operation and maintenance of the Mortgaged Property and the Disclosed Assets, and (iv) personal property and residences used primarily for the

personal use of the Borrower and their family; (b) shall not operate any business other than the management and operation of the Mortgaged Property and the Disclosed Assets; (c) shall not maintain its assets in a way which is difficult to segregate and identify and (d) grant, create or permit the existence of any new or additional mortgage, deed of trust, deed to secure debt or other lien encumbrance on any of the Disclosed Assets, the Mortgaged Property or ownership interest in the Borrower, whether voluntary, involuntary or by operation of law.  In the event the Property shall be transferred, the single asset requirements of the original Section 33 of this Instrument shall apply for any transferee.”

6.

The following new Section is added at the end of the Instrument after the last numbered Section, but there are no Sections between the last numbered Section and Section 55:

“55.  CONVEYANCE.

No later than September 30, 2007, Borrower shall convey all of its interest in the Mortgaged Property (the “Conveyance”) to a Lender-approved, single-asset, single purpose entity.  Failure to complete the Conveyance shall constitute an event of default under Section 22 of the Security Instrument.

The documents evidencing the Conveyance shall be submitted to Lender for review prior to the Conveyance, and shall be in form and substance satisfactory to Lender.  Borrower agrees to pay all costs incurred in connection with the Conveyance; including, without limitation, the legal fees, if any, of Lender’s attorneys in connection with the required review and approval and the endorsement to the Lender’s title insurance policy.

Completion of the Conveyance shall be evidenced by submission to Lender of the recorded conveyance documents and an endorsement to the Lender’s title insurance policy.

It is understood that no transfer or application fee shall be due in connection with the Conveyance, and that the Conveyance shall not be deemed to violate Section 21 of the Security Instrument respecting Transfers.”

7.

AIMCO STANDARD.

A.

Section 1(v) is modified to read as follows:

(v)

"Personalty" means all furniture, furnishings, equipment, machinery, building materials, appliances, goods, supplies, tools, books, records (whether in written or electronic form), computer equipment (hardware and software) and other tangible personal property (other than Fixtures) which are used now or in the future exclusively in connection with the ownership, management or operation of the Land or the Improvements or are located on the Land or in the Improvements, and any operating agreements relating to the Land or the Improvements, and any surveys, plans and specifications and contracts for architectural, engineering and construction services relating to the Land or the Improvements and all other intangible property and rights exclusively relating to the operation of, or used exclusively in connection with, the Land or the Improvements including all governmental permits relating to any activities on the Land.

B.

Section 7(c) is modified to read as follows:

(c)

Notwithstanding the provisions of  Section 7(a), Lender will not require Borrower to deposit with Lender amounts sufficient to accumulate with Lender the entire sum required to pay the water and sewer charges, fire, hazard or other insurance premiums, and ground rents.  At least annually, Borrower must provide Lender with proof of payment of all such Impositions for which Lender is not collecting Imposition Deposits.  In the event that Borrower does not timely pay any of the Impositions, or fails to provide Lender with proof of such payment, or upon the occurrence of an Event of Default hereunder, or upon Borrower’s failure to maintain the Mortgaged Property in a satisfactory manner in accordance with the requirements of this Instrument, then in any such events, Lender may require Borrower to deposit with Lender the Imposition Deposits as provided in Section 7(a).

C.

Except in a case where Lender in its discretion determines that an emergency exists, Lender may take actions specified in Section 12(a) only if Lender has notified Borrower of Borrower's failure to perform any of its obligations under this Instrument or any other Loan Document and Borrower does not cure the failure within ten (10) days after such notice.  If Lender so determines that an emergency exists, Lender shall notify Borrower of the action taken within ten (10) days after the action is taken.

D.

Sections 14(b)(4) and 14(b)(5) are modified to read as follows:

(4)

within 120 days after the end of each fiscal year of Borrower, and at any other time upon Lender's request, a statement that identifies all owners of any interest in Borrower and each general partner in Borrower, and confirming that the ownership of each other Controlling Entity has not changed in a manner that violates Section 21(a);

(5)

promptly following Lender's request, quarterly or monthly income and expense statements for the Property relating to a quarterly or monthly period, as the case may be, ending no later than 45 days before the request;

E.

For purposes of Section 14(b), Borrower shall be deemed to have delivered any statement or document "upon Lender's request" if Borrower has delivered the document promptly following Lender's request.

F.

Notwithstanding Section (14)(c), unless an Event of Default has occurred and is continuing, or Lender has determined that an event having a Material Adverse Effect has occurred, Lender may require that the financial statements required by Sections 14(b)(1), 14(b)(2) and 14(b)(3) be audited, but may not require that any other financial statements required by Section 14 be audited.  Certification of a statement by the chief financial officer of the entity that is the subject of the statement or, in the case of a partnership, the chief financial officer of the general partner, will be acceptable to Lender as certification by an individual having authority to bind Borrower.

G.

Lender shall not have Borrower's books and records audited pursuant to Section 14(d) unless Lender has given Borrower notice specifying the statements, schedules and reports required by Section 14(b) that Borrower has failed to provide, and Borrower has not provided such statements by the expiration of ten days after such notice.

H.

So long as Borrower is contesting the amount and validity of any Imposition other than insurance premiums diligently and in good faith as described in Section 15(d) and all of the conditions specified in clauses (1) through (4) of Section 15(d) are satisfied, Lender will refrain from applying Imposition Deposits to payment of the contested Imposition.

I.

Section 15(e) and Section 16 are modified to read as follows:

15(e)

Borrower shall promptly deliver to Lender a copy of all notices of, and invoices for Impositions, and if Borrower pays any Imposition directly (which Borrower has no obligation to do unless Imposition Deposits have been waived or are insufficient and Lender has notified Borrower of that insufficiency), Borrower shall promptly furnish to Lender receipts evidencing such payments.

16.

LIENS; ENCUMBRANCES.  Borrower acknowledges that, to the extent provided in Section 21, the grant, creation or existence of any mortgage, deed of trust, deed to secure debt, security interest or other lien or encumbrance (a “Lien”) on the Mortgaged Property (other than the lien of this Instrument), or on certain ownership interests in Borrower, whether voluntary, involuntary or by operation of law, and whether or not such lien has priority over the lien of this Instrument, is a “Transfer” which constitutes an Event of Default.

J.

For purposes of Section 18(b), "pre-packaged supplies, cleaning materials and petroleum products customarily used in the operation and maintenance of comparable multifamily properties" shall include, without limitation, pool, spa, maintenance and gardening materials.

K.

The second sentence of Section 18(c) is modified to read as follows:

Borrower shall not lease or allow the sublease or use of all or any portion of the Mortgaged Property to any tenant or subtenant for nonresidential use by any user that, in the ordinary course of its business, would be reasonably expected to cause or permit any Prohibited Activity or Condition.

L.

For purposes of Section 18(d), Borrower shall only be obligated to pay out-of-pocket expenses incurred by Lender in connection with the monitoring and review of an O&M Program and Borrower's performance to the extent such expenses are reasonable.

M.

Borrower's representation and warranty in Section 18(e)(4) regarding requirements for notification regarding releases of Hazardous Materials shall relate only to such releases, if any, at or affecting the Mortgaged Property.

N.

Section 18(e)(5) is modified to read as follows:

(5)

no event has occurred with respect to the Mortgaged Property that constitutes, or with the passing of time or the giving of notice would reasonably be expected to constitute, noncompliance with the terms of any Environmental Permit;

O.

Section 18(g) is modified to read as follows:

(g)

Borrower shall pay promptly the costs of any environmental inspections, tests or audits ("Environmental Inspections") required by Lender in connection with or in preparation for any foreclosure or deed in lieu of foreclosure.  Borrower shall also pay promptly the reasonable costs of any Environmental Inspections required by Lender in connection with, or as a condition of Lender's consent to any Transfer under Section 21, or required by Lender following a reasonable determination by Lender that Prohibited Activities or Conditions may exist.  Any such costs incurred by Lender (including the fees and out-of-pocket costs of attorneys and technical consultants whether incurred in connection with any judicial or administrative process or otherwise) which Borrower fails to pay promptly shall become an additional part of the Indebte dness as provided in Section 12. The results of all Environmental Inspections made by Lender in connection with or in preparation for any foreclosure or deed in lieu of foreclosure shall at all times remain the property of Lender and Lender shall have no obligation to disclose such results to or otherwise make such results available to Borrower or any other party.  Lender will make available to Borrower the results of all other Environmental Inspections made by Lender.  Lender hereby reserves the right, and Borrower hereby expressly authorizes Lender, to make available to any party, including any prospective bidder at a foreclosure sale of the Mortgaged Property, the results of any Environmental Inspections made by Lender with respect to the Mortgaged Property.  Borrower consents to Lender notifying any party (either as part of a notice of sale or otherwise) of the results of any of Lender's Environmental Inspections.  Except in the case of an Environmental Inspection performed in connect ion with a foreclosure or deed in lieu of foreclosure, or a disclosure of Environmental Inspection results that Lender is required by law to make, Lender shall notify Borrower of its intention to disclose such information and shall give Borrower ten days to provide supplemental information, explanations or corrections to accompany the disclosure. Borrower acknowledges that Lender cannot control or otherwise assure the truthfulness or accuracy of the results of any of its Environmental Inspections and that the release of such results to prospective bidders at a foreclosure sale of the Mortgaged Property may have a material and adverse effect upon the amount which a party may bid at such sale.  Borrower agrees that Lender shall have no liability whatsoever as a result of delivering the results of any of its Environmental Inspections to any third party, and Borrower hereby releases and forever discharges Lender from any and all claims, damages, or causes of

action, arising, out of, connected with or incidental to the results of, the delivery of any of Lender's Environmental Inspections.

P.

Lender shall not commence Remedial Work under the second sentence of Section 18(h) unless Lender has given Borrower notice of its intention to do so and Borrower has not begun performing the Remedial Work within 10 days after such notice.

Q.

The following sentence is added at the end of Section 18(j):

However, Borrower shall have no obligation to indemnify any of the foregoing parties to the extent that the proceedings, claims, damages, penalties or costs arise out of the gross negligence or willful misconduct of Lender, any prior owner or holder of the Note, the Loan Servicer or any prior Loan Servicer.

R.

For purposes of Section 19(b), Lender will accept a duplicate original of any insurance policy.

S.

For purposes of Section 19(d), an insurance company will be acceptable to Lender if it has a rating in Best's Key Rating Guide of at least "A-" and a financial size category of at least “v,” provided that if Fannie Mae changes its requirements for the financial rating of insurers generally, Lender may change the requirement set forth in this sentence in a manner consistent with any such change.

T.

Clause (2) of Section 19(g) is modified to read as follows:

(2)

Lender determines, in its discretion, that the combination of insurance proceeds and amounts provided by the Borrower will be sufficient to complete the Restoration.

U.

For purposes of Section 19(h), Lender shall automatically succeed to rights of Borrower in and to insurance policies and unearned premiums only to the extent permitted by the applicable policies and insurance companies.

V.

Section 21(a)(2) is modified to read as follows:

(2)

if Borrower is a joint venture general partnership, a Transfer of (A) any general partnership interest (except for a Transfer to a Qualified REIT Subsidiary, as defined in Section 856(i)(2) of the Internal Revenue Code of 1986, 100% owned by Apartment Investment and Management Company, a Maryland corporation or to a Qualified REIT Subsidiary, as defined in Section 856 (l)(1) of the Internal Revenue Code of 1986, 100% owned by AIMCO OP), or (B) other interests in Borrower that would cause the Initial Owners of Borrower to own less than 51% of all partnership interests in Borrower;

W.

New Sections 21(b)(7), 21(b)(8), 21(b)(9), and 21(b)(10) are added, as follows:

(7)

The Transfer of any joint venture partnership interests in Borrower provided no Change of Control occurs as a result of such Transfer.

(8)

The Transfer of shares of common stock, limited partnership interests or other beneficial or ownership interests or other forms of securities in AIMCO REIT or AIMCO OP, and the issuance of all varieties of convertible debt, equity and other similar securities of AIMCO REIT or AIMCO OP, and the subsequent Transfer of such securities; provided, however, that no Change of Control occurs as a result of such Transfer, either upon such Transfer or upon the subsequent conversion to equity of such convertible debt or other securities.

(9)

The issuance by AIMCO REIT or AIMCO OP of additional common stock, limited partnership interests or other beneficial or ownership interests, convertible debt, equity and other similar securities, and the subsequent Transfer of such convertible debt or securities; provided, however, that no Change of Control occurs as the result of such Transfer, either upon such Transfer or upon the subsequent conversion to equity of such convertible debt or other securities.

(10)

So long as AIMCO REIT owns 100% of the stock of AIMCO-LP, Inc., a Transfer of limited partnership interests that results in AIMCO-LP, Inc. owning not less than 50.1% of the limited partnership interests in AIMCO OP.

X.

Section 21(b)(8) shall apply only to a Transfer of an interest in a Controlling Entity that is prohibited by Section 21(a)(7).

Y.

A new Section 21(d) is added, as follows:

(d)

For purposes of this Section 21, the following terms shall be defined as follows:

(1)

"Change of Control" shall mean the earliest to occur of (A) the date an Acquiring Person becomes (by acquisition, consolidation, merger or otherwise), directly or indirectly, the beneficial owner of more than forty percent (40%) of the total Voting Equity Capital of AIMCO REIT then outstanding, or (B) the date on which AIMCO REIT shall cease to hold (whether directly or indirectly through a wholly owned intermediary entity such as AIMCO-LP, Inc. or AIMCO-GP, Inc.) at least 50.1% of the limited partnership interests in AIMCO OP, or (C) the date on which AIMCO REIT shall cease for any reason to hold (whether directly or indirectly) (i) the

interests in the Joint Venture Partners held as of the date of this Instrument (as evidenced by organizational charts and documents submitted to Lender as of such date) and (ii) the Controlling Interest(s) in the Borrower, or (D) the replacement (other than solely by reason of retirement at age sixty-five or older, death or disability) of more than 50% (or such lesser percentage as is required for decisionmaking by the board of directors of trustees, if applicable) of the members of the board of directors (or trustee, if applicable) of AIMCO REIT over a one-year period where such replacement shall not have been approved by a vote of at least a majority of the board of directors (or trustees, if applicable) of AIMCO REIT then still in office who either were members of such board of directors (or trustees, if applicable) at the beginning of such one y ear period or whose election as members of the board of directors (or trustees, if applicable) was previously so approved.

(2)

"Acquiring Person" shall mean a "person" or group of "persons" within the meaning of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended.  However, notwithstanding the foregoing, “Acquiring Person” shall not be deemed to include any member of the Borrower Control Group unless such member has, directly or indirectly, disposed of, sold or otherwise transferred to, or encumbered or restricted (whether by means of voting trust agreement or otherwise) for the benefit of an Acquiring Person, all or any portion of the Voting Equity Capital of AIMCO REIT directly or indirectly owned or controlled by such member or such member directly or indirectly votes all or any portion of the Voting Equity Capital of AIMCO REIT, directly or indirectly, owned or controlled by such member for the taking of any action which, direc tly or indirectly constitutes or would result in a Change of Control, in which event such member of the Borrower Control Group shall be deemed to constitute an Acquiring Person to the extent of the Voting Equity Capital of AIMCO REIT owned or controlled by such member.

(3)

"Borrower Control Group" shall mean Terry Considine, Peter K. Kompaniez, Richard S. Ellwood, J. Landis Martin, Thomas L. Rhodes and James N. Bailey.

(4)

A "Person" shall mean an individual, an estate, a trust, a corporation, a partnership, a limited liability company or any other organization or entity (whether governmental or private).

(5)

"Security" shall have the same meaning as in Section 2(1) of the Securities Act of 1933, as amended.

(6)

"Controlling Interest(s)" shall mean (i) with respect to a partnership, such majority and/or managing general partner interests which, together with a majority of limited partnership interests if necessary for consent purposes, vest in the holder of such interests the sole power, right and authority to control the day to day operations of the Borrower; including, without limitation, the authority to manage, operate and finance the Mortgaged Property, (ii) with respect to a corporation, the number of shares which entitle the holder to elect a majority of the board of directors of the Borrower, and (iii) with respect to a limited liability company, such majority and/or managing member interests as vest in the holder of such interests the sole power, right and authority to control the day to day operations of the Borrower; including, without limitation, the authority to manage, operate and finance the Mortgaged Property.

(7)

"AIMCO REIT" shall mean Apartment Investment and Management Company, a corporation organized and existing under the laws of the State of Maryland.

(8)

"AIMCO OP" shall mean AIMCO Properties, L.P., a limited partnership organized and existing under the laws of the State of Delaware.

(9)

"Joint Venture Partners" shall mean the entities executing this Instrument on behalf of the Borrower and/or its successors or assigns in interest.

(10)

“Voting Equity Capital” shall mean Securities of any class or classes, the holders of which are ordinarily, in the absence of contingencies, entitled to elect a majority of the board of directors (or Persons performing similar functions).

V.

Section 22(a) is modified to read as follows:

(a)

any failure by Borrower to pay or deposit (i) any Imposition Deposit within three days after it is due, or (ii) any other amount required by the Note, this Instrument, or any other Loan Document when due.

W.

Section 28 shall obligate Borrower to provide such further assurances as Lender reasonably may require.

X.

The words "Except as otherwise disclosed to Lender in writing, before the date of this Instrument" are added at the beginning of the second sentence of Section 41.

V.

Section 37 is modified by adding: “; provided, however, that in the event of a Transfer, any or some or all of the Modifications to Instrument set forth in Exhibit B (if any) may be modified or rendered void by Lender at Lender’s option by notice to Borrower/transferee”.  The modifications set forth in this Exhibit B shall be null and void unless title to the Mortgaged Property is vested in an entity whose Controlling Interest(s) are directly or indirectly held by AIMCO REIT or AIMCO OP.

INITIALS

EX-10

EXHIBIT 10.44

Forest Ridge Apartments

MULTIFAMILY NOTE

(VARIABLE LOAN)

US $8,667,809.00

As of January 18, 2007

FOR VALUE RECEIVED, the undersigned (“Borrower”) promises to pay to the order of CAPMARK FINANCE INC., a California corporation, the principal sum of Eight Million Six Hundred Sixty-Seven Thousand Eight Hundred Nine and 00/100 Dollars (US $8,667,809.00), with interest on each Variable Loan at an annual rate as calculated in Section 3 hereof.

This Note is executed and delivered by Borrower pursuant to one of either (i) that certain Amended and Restated Loan Agreement, dated as of September 16, 2002, by and among certain borrowers signatory thereto and Lender or (ii) that certain Loan Agreement dated as of November 1, 2002, by and among certain borrowers signatory thereto and Lender.  As used herein, the term “Loan Agreement” shall mean whichever of the loan agreements described in the preceding sentence shall apply from time to time in accordance with their respective terms, along with all amendments, supplements, replacements, restatements or other modifications thereto or thereof from time to time made.  The Loan Agreement shall evidence the obligation of Borrower to repay a Variable Loan made by Lender to Borrower in accordance with the terms of the Loan Agreement.  This Note is entitled to the benef it and security of the Loan Documents provided for in the Loan Agreement, to which reference is hereby made for a statement of all of the terms and conditions under which the Variable Loan evidenced hereby is made.  The Loan Agreement requires certain of the terms of each Variable Loan to be evidenced by one or a series of Loan Confirmation Instruments, and reference is hereby made to each such Loan Confirmation Instrument for such terms.

1.

Defined Terms.  As used in this Note, (i) the term “Lender” means the holder of this Note, and (ii) the term “Indebtedness” means the principal of, interest on, or any other amounts due at any time under, this Note, the Security Instrument or any other Loan Document, including prepayment premiums, late charges, default interest, and advances to protect the security of the Security Instrument under Section 12 of the Security Instrument.  Event of Default and other capitalized terms used but not defined in this Note shall have the meanings given to such terms in the Loan Agreement or, if not defined in the Loan Agreement, as defined in the Security Instrument (as defined in Paragraph 5).

2.

Address for Payment.  All payments due under this Note shall be payable at Capmark Finance Inc., 116 Welsh Road, Horsham, PA  19044 , Attention:  Servicing – Account Manager, or such other place as may be designated by written notice to Borrower from or on behalf of Lender.

3.

Payment of Principal and Interest.  Principal and interest shall be paid as follows:

(a)

This Note shall evidence a Variable Loan made from time to time under the Loan Agreement.  The Variable Loan shall bear interest at a rate determined in accordance with Section 2.01 of the Loan Agreement.

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(b)

Borrower shall pay imputed interest on each Variable Loan in advance in the form of a Discount in accordance with Section 1.04(b) of the Loan Agreement (except that Borrower shall pay actual interest on the Variable Loan for the partial month period, if any, in accordance with Section 1.04(a) of the Loan Agreement).  

(c)

Borrower shall make monthly payments of principal each in the amount as set forth on the attached Amortization Schedule.  Lender shall apply each such principal payment to the outstanding principal amount of the Loan on the Rollover Date next following receipt of any such payment.  If not sooner paid, the entire principal amount of the Variable Loan shall be due and payable on the earlier of (i) the termination of the Loan Agreement pursuant to subsection (e) of Section 1.02 thereof, (ii) the fifth anniversary (unless such date is extended pursuant to Section 1.07 of the Loan Agreement, in which case, the tenth anniversary) of the Initial Closing Date or (iii) the maturity date of any outstanding MBS, unless either (A) not less than five Business Days prior to the maturity date of the outstanding MBS, a Borrower has requested that the outstanding MBS be renewed wi th a new MBS or converted to a Fixed Loan to take effect on the maturity date of the outstanding MBS and such new MBS has been issued or conversion has occurred or (B) the MBS is automatically renewed, which automatic renewal shall occur in the event that a Borrower does not make the request set forth in subpart (iii)(A) above and does not give Lender notice not less than five Business days prior to the maturity date of the outstanding MBS that the Variable Loan related to such outstanding MBS shall be paid on the maturity date of such outstanding MBS (the “Maturity Date”).  Any MBS that is issued as a result of an automatic renewal of a maturing MBS as contemplated by subpart (iii)(B) above shall have a maturity date of three (3) months after the MBS Issue Date.  

(d)

In addition to payment of principal and the Discount, Borrower shall pay the Variable Loan Fee due on each Variable Loan in accordance with Section 1.04(b)(ii) of the Loan Agreement.

4.

Application of Payments.  If at any time Lender receives, from Borrower or otherwise, any amount applicable to the Indebtedness that is less than all amounts due and payable at such time, Lender may apply that payment to amounts then due and payable in any manner and in any order determined by Lender, in Lender’s discretion.  Borrower agrees that neither Lender’s acceptance of a payment from Borrower in an amount that is less than all amounts then due and payable nor Lender’s application of such payment shall constitute or be deemed to constitute either a waiver of the unpaid amounts or an accord and satisfaction.

5.

Security.  The Indebtedness is secured, among other things, by a multifamily mortgage, deed to secure debt or deed of trust dated as of the date of this Note (the “Security Instrument”) and reference is made to the Security Instrument for other rights of Lender concerning the collateral for the Indebtedness.

6.

Acceleration.  If an Event of Default has occurred and is continuing, the entire unpaid principal balance, any accrued interest, the prepayment premium payable under Paragraph 10, if any, and all other amounts payable under this Note and any other Loan Document shall at once become due and payable, at the option of Lender, without any additional notice to Borrower.  Lender may exercise this option to accelerate regardless of any prior forbearance.

7.

Late Charge.  If any monthly amount payable under this Note or under the Security Instrument or any other Loan Document is not received by Lender within 10 days after the amount is due, Borrower shall pay to Lender, immediately and without demand by Lender, a late charge equal to 5 percent of such amount.  Borrower acknowledges that its failure to make timely payments will cause Lender to incur additional expenses in servicing and processing the loan evidenced by this Note (the “Loan”), and that it is extremely difficult and impractical to determine those additional expenses.  Borrower agrees that the late charge payable pursuant to

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this Paragraph represents a fair and reasonable estimate, taking into account all circumstances existing on the date of this Note, of the additional expenses Lender will incur by reason of such late payment.  The late charge is payable in addition to, and not in lieu of, any interest payable at the Default Rate pursuant to Paragraph 8.

8.

Default Rate.  So long as any monthly installment or any other payment due under this Note remains past due for 30 days or more, interest under this Note shall accrue on the unpaid principal balance from the earlier of the due date of the first unpaid monthly installment or other payment due, as applicable, at a rate (the “Default Rate”) equal to the lesser of 4 percentage points above the rate stated in the first paragraph of this Note or the maximum interest rate which may be collected from Borrower under applicable law.  If the unpaid principal balance and all accrued interest are not paid in full on the Maturity Date, the unpaid principal balance and all accrued interest shall bear interest from the Maturity Date at the Default Rate.  Borrower also acknowledges that its failure to make timely payments will cause Lender to incur additional expenses in s ervicing and processing the Loan, that, during the time that any monthly installment or payment under this Note is delinquent for more than 30 days, Lender will incur additional costs and expenses arising from its loss of the use of the money due and from the adverse impact on Lender’s ability to meet its other obligations and to take advantage of other investment opportunities, and that it is extremely difficult and impractical to determine those additional costs and expenses.  Borrower also acknowledges that, during the time that any monthly installment or payment due under this Note is delinquent for more than 30 days, Lender’s risk of nonpayment of this Note will be materially increased and Lender is entitled to be compensated for such increased risk.  Borrower agrees that the increase in the rate of interest payable under this Note to the Default Rate represents a fair and reasonable estimate, taking into account all circumstances existing on the date of this Note, of the additional costs and expenses Lender will incur by reason of Borrower’s delinquent payment and the additional compensation Lender is entitled to receive for the increased risks of nonpayment associated with a delinquent loan.

9.

Limits on Personal Liability.

(a)

Except as otherwise provided in this Paragraph 9, Borrower shall have no personal liability under this Note, the Security Instrument or any other Loan Document for the repayment of the Indebtedness or for the performance of any other obligations of Borrower under the Loan Documents, and Lender’s only recourse for the satisfaction of the Indebtedness and the performance of such obligations shall be Lender’s exercise of its rights and remedies with respect to the Mortgaged Property and any other collateral held by Lender as security for the Indebtedness.  This limitation on Borrower’s liability shall not limit or impair Lender’s enforcement of its rights against any guarantor of the Indebtedness or any guarantor of any obligations of Borrower.

(b)

Borrower shall be personally liable to Lender for the repayment of a portion of the Indebtedness equal to any loss or damage suffered by Lender as a result of (1) failure of Borrower to pay to Lender upon demand after an Event of Default, all Rents to which Lender is entitled under Section 3(a) of the Security Instrument and the amount of all security deposits collected by Borrower from tenants then in residence; (2) failure of Borrower to apply all insurance proceeds and condemnation proceeds as required by the Security Instrument; (3) failure of Borrower to comply with Section 14(d) or (e) of the Security Instrument relating to the delivery of books and records, statements, schedules and reports; (4)  fraud or written material misrepresentation by Borrower or any officer, director, partner, member or employee of Borrower in connection with the application for or creation of the Indebtedn ess or any request for any action or consent by Lender; or (5) failure to apply Rents, first, to the payment of reasonable operating expenses (other than Property management fees that are not currently payable pursuant to the terms of an Assignment of Management Agreement or any other agreement with Lender executed in connection with the Loan) and then to amounts  (“Debt

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Service Amounts”) payable under this Note, the Security Instrument or any other Loan Document (except that Borrower will not be personally liable (i) to the extent that Borrower lacks the legal right to direct the disbursement of such sums because of a bankruptcy, receivership or similar judicial proceeding, or (ii) with respect to Rents that are distributed in any calendar year if Borrower has paid all operating expenses and Debt Service Amounts for that calendar year).

(c)

Borrower shall become personally liable to Lender for the repayment of all of the Indebtedness upon the occurrence of any of the following Events of Default: (1) Borrower’s acquisition of any property or operation of any business not permitted by Section 33 of the Security Instrument; or (2) a Transfer that is an Event of Default under Section 21 of the Security Instrument.

(d)

To the extent that Borrower has personal liability under this Paragraph 9, Lender may exercise its rights against Borrower personally without regard to whether Lender has exercised any rights against the Mortgaged Property or any other security, or pursued any rights against any guarantor, or pursued any other rights available to Lender under this Note, the Security Instrument, any other Loan Document or applicable law. For purposes of this Paragraph 9, the term “Mortgaged Property” shall not include any funds that (1) have been applied by Borrower as required or permitted by the Security Instrument prior to the occurrence of an Event of Default, or (2) Borrower was unable to apply as required or permitted by the Security Instrument because of a bankruptcy, receivership, or similar judicial proceeding.

10.

Voluntary and Involuntary Prepayments.  Pursuant to the terms of the Loan Agreement, Borrower shall pay the entire amount of the Discount on any Variable Loan in advance.  Accordingly, any Variable Loan may be prepaid in whole or in part and at any time without penalty.  Borrower shall give Lender six (6) Business Days advance notice of any prepayment.

11.

Costs and Expenses.  Borrower shall pay on demand all reasonable expenses and costs, including reasonable fees and out-of-pocket expenses of attorneys and expert witnesses and costs of investigation, incurred by Lender as a result of any default under this Note or in connection with efforts to collect any amount due under this Note, or to enforce the provisions of any of the other Loan Documents, including those incurred in post-judgment collection efforts and in any bankruptcy proceeding (including any action for relief from the automatic stay of any bankruptcy proceeding) or judicial or non-judicial foreclosure proceeding.

12.

Forbearance.  Any forbearance by Lender in exercising any right or remedy under this Note, the Security Instrument, or any other Loan Document or otherwise afforded by applicable law, shall not be a waiver of or preclude the exercise of that or any other right or remedy.  The acceptance by Lender of any payment after the due date of such payment, or in an amount which is less than the required payment, shall not be a waiver of Lender’s right to require prompt payment when due of all other payments or to exercise any right or remedy with respect to any failure to make prompt payment.  Enforcement by Lender of any security for Borrower’s obligations under this Note shall not constitute an election by Lender of remedies so as to preclude the exercise of any other right or remedy available to Lender.

13.

Waivers.  Except as expressly provided in the Loan Agreement, presentment, demand, notice of dishonor, protest, notice of acceleration, notice of intent to demand or accelerate payment or maturity, presentment for payment, notice of nonpayment, grace, and diligence in collecting the Indebtedness are waived by Borrower and all endorsers and guarantors of this Note and all other third party obligors.

14.

Loan Charges.  If any applicable law limiting the amount of interest or other charges permitted to be collected from Borrower in connection with the Loan is interpreted so

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that any interest or other charge provided for in any Loan Document, whether considered separately or together with other charges provided for in any other Loan Document, violates that law, and Borrower is entitled to the benefit of that law, that interest or charge is hereby reduced to the extent necessary to eliminate that violation.  Borrower agrees to an effective rate of interest that is the stated rate of interest plus any additional rate of interest resulting from any other charges or fees that are to be paid by Borrower to Lender that may be found by a court of competent jurisdiction to be interest.  The amounts, if any, previously paid to Lender in excess of the permitted amounts shall be applied by Lender to reduce the unpaid principal balance of this Note.  For the purpose of determining whether any applicable law limiting the amount of intere st or other charges permitted to be collected from Borrower has been violated, all Indebtedness that constitutes interest, as well as all other charges made in connection with the Indebtedness that constitute interest, shall be deemed to be allocated and spread ratably over the stated term of the Note.  Unless otherwise required by applicable law, such allocation and spreading shall be effected in such a manner that the rate of interest so computed is uniform throughout the stated term of the Note.

15.

Commercial Purpose.  Borrower represents that the Indebtedness is being incurred by Borrower solely for the purpose of carrying on a business or commercial enterprise, and not for personal, family or household purposes.

16.

Counting of Days.  Except where otherwise specifically provided, any reference in this Note to a period of “days” means calendar days, not Business Days.

17.

Governing Law; Consent to Jurisdiction; WAIVER OF JURY TRIAL.  The provisions of Section 11.07 of the Loan Agreement (entitled “Choice of Law; Consent to Jurisdiction; Waiver of Jury Trial”) are hereby incorporated into this Note by this reference to the fullest extent as if the text of such Section were set forth in its entirety herein.

18.

Captions.  The captions of the paragraphs of this Note are for convenience only and shall be disregarded in construing this Note.

19.

Notices.  All notices, demands and other communications required or permitted to be given by Lender to Borrower pursuant to this Note shall be given in accordance with Section 11.09 of the Loan Agreement.

20.

Security for this Note.  Reference is made hereby to the Loan Agreement and the Security Documents for additional rights and remedies of Lender relating to the indebtedness evidenced by this Note.  Each Security Document shall be released in accordance with the provisions of the Security Documents.

21.

Loan May Not Be Reborrowed.  Borrower may not re-borrow any amounts under this Note which it has previously borrowed and repaid under this Note.

22.

Default Under Loan Agreement and Other Loan Documents.  The occurrence of an Event of Default under the Loan Agreement or the Security Instrument shall constitute an “Event of Default” under this Note in accordance with the Loan Agreement and the Security Instrument.  Upon the occurrence of an Event of Default under the Loan Agreement or the Security Instrument, the entire principal amount outstanding hereunder and accrued interest thereon shall at once become due and payable, at the option of the holder hereof.

23.

Loan Confirmation Instruments; Accounting for Variable Loans.  The terms of the Loan Agreement and this Note govern the repayment, and all other terms relating to the Variable Loan.  However, Borrower shall execute a Loan Confirmation Instrument to create a physical instrument evidencing each MBS issued to fund the Variable Loan.  The Loan Confirmation Instrument executed by Borrower in accordance with Section 2.02 of the Loan

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Agreement shall set forth the amount, term, Discount, Closing Date and certain other terms of each MBS issued to fund the Variable Loan.  The Loan Confirmation Instrument shall conclusively establish each of the terms described in the preceding sentence, absent manifest error.  The MBS evidenced by the Loan Confirmation Instrument does not represent a separate indebtedness from that evidenced by this Note.   In making proof of this Note, no other documents other than this Note shall be required.  In making proof of the amount and terms of the outstanding Variable Loans under this Note, this Note, the related Loan Confirmation Instruments, and Lender’s records concerning payments made by Borrower under this Note, shall be conclusive evidence of the terms and outstanding amounts of the Variable Loan, absent manifest error.

24.

Modifications to Note.  There are standard modifications to this Note that are attached as Exhibit B-1 and Exhibit B-2 hereto.  In addition, there may be special modifications to this Note attached as Exhibit B-3 hereto.  All such exhibits are hereby incorporated into this Note as a part hereof.

IN WITNESS WHEREOF, Borrower has signed and delivered this Note under seal or has caused this Note to be signed and delivered under seal by its duly authorized representative.  Borrower intends that this Note shall be deemed to be signed and delivered as a sealed instrument.

[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]

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VMS NATIONAL PROPERTIES, an Illinois joint venture general partnership

By:  VMS National Residential Portfolio I, an Illinois limited partnership, its joint venture partner

By:  Maeril, Inc., a Delaware corporation, its general partner

By:   /s/Patti K. Fielding

Patti K. Fielding

Executive Vice President and Treasurer

By:  VMS National Residential Portfolio II, an Illinois limited partnership, its joint venture partner

By:  Maeril, Inc., a Delaware corporation, its general partner

By:   /s/Patti K. Fielding

Patti K. Fielding

Executive Vice President and Treasurer

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PAY TO THE ORDER OF FANNIE MAE, WITHOUT RECOURSE.

CAPMARK FINANCE INC., a California corporation

By:  /s/Max W. Foore

Max W. Foore

Vice President

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EXHIBIT B-1

GMACCM LOAN AGREEMENT MODIFICATIONS

During any time that the terms, covenants and provisions of that certain Loan Agreement dated as of November 1, 2002 and more particularly described in the second paragraph on page 1 of the Note apply to the Variable Loan evidenced by the Note, paragraphs 3 and 23 of the Note are amended and replaced with the following substitute paragraphs 3 and 23:

“3.

Payment of Principal and Interest.  Principal and interest shall be paid as follows:

(a)

This Note shall evidence a Variable Loan made from time to time under the Loan Agreement.  Borrower shall not be required to make monthly principal payments prior to the Fannie Mae Addition Date, but shall make monthly payments of principal after the Fannie Mae Reassignment Date, if it occurs, as set forth in Section 1.04(d) of the Loan Agreement.

(b)

Borrower shall pay actual interest on the Variable Loan during the period described in accordance with Section 1.04(a) of the Loan Agreement.  Borrower shall pay interest on its Variable Rate Loan in arrears at a rate equal to LIBOR Rate plus a number of basis points determined in accordance with Section 2.01 of the Loan Agreement.  For purposes of the previous sentence, the LIBOR Rate shall be reset every ninety (90) days commencing on the date that is ninety (90) days after the Initial Closing Date.  On the date the Variable Loan is funded, Borrower shall pay interest in advance from the date of funding through January 31, 2007.  On March 1, 2007 and on the first (1st) day of each calendar month thereafter, Borrower shall pay interest in arrears calculated for the actual number of days since the first (1st) day of the previous calendar month.

(c)

If not sooner paid, the entire principal amount of the Variable Loan shall be due and payable in accordance with Section 1.02 of the Loan Agreement.  

(d)

Borrower shall not pay any Discount.

23.

Loan Confirmation Instruments; Accounting for Variable Loans.  The terms of the Loan Agreement and this Note govern the repayment, and all other terms relating to the Variable Loan.  However, Borrower shall execute one or a series of Loan Confirmation Instruments to create a physical instrument evidencing the terms of the Variable Loan.  The Loan Confirmation Instrument or series of Loan Confirmation Instruments executed by Borrower in accordance with Section 2.02 of the Loan Agreement shall set forth the amount, term, the interest rate spread over the LIBOR Rate Closing Date and certain other terms related to the funding the Variable Loan.  The Loan Confirmation Instrument shall conclusively establish each of the terms described in the preceding sentence, absent manifest error.  The variable terms evidenced by the Loan Confirmation Instrument do not represe nt a separate indebtedness from that evidenced by this Note.   In making proof of this Note, no other documents other than this Note shall be required.  In making proof of the amount and terms of the outstanding Variable Loans under this Note, this Note, the related Loan Confirmation Instruments, and Lender’s records concerning payments made by Borrower under this Note, shall be conclusive evidence of the terms and outstanding amounts of the Variable Loan, absent manifest error.”

During any time that the terms, covenants and provisions of that certain Amended and Restated Loan Agreement dated as of September 16, 2002 and more particularly described in the second paragraph on page 1 of the Note apply to the Variable Loan evidenced by the Note, this Exhibit B-1 shall not apply and paragraphs 3 and 23 of the Note shall not be amended or replaced with the provisions set forth in this Exhibit B-1.

B-1

EXHIBIT B-2

AIMCO MODIFICATIONS

The following modifications are made to the text of the Note that precedes this Exhibit:

1.

Section 9(b)(4) is modified by deleting “or” at the end thereof.

2.

Section 9(b)(5) is modified to read as follows:

“(5) failure to apply Rents, first, to the payment of reasonable operating expenses (other than Property management fees that are not currently payable pursuant to the terms of an Assignment of Management Agreement or any other agreement with Lender executed in connection with the Loan) and then to amounts (“Debt Service Amounts”) payable under this Note, the Security Instrument or any other Loan Document (except that Borrower will not be personally liable (i) to the extent that Borrower lacks the legal right to direct the disbursement of such sums because of a bankruptcy, receivership or similar judicial proceeding, or (ii) with respect to Rents that are distributed in any calendar quarter if Borrower has paid all operating expenses and Debt Service Amounts for such calendar quarter to date); or”

3.

A new Section 9(b)(6) is added following Section 9(b)(5), stating as follows:

“(6) failure to pay when due any water and sewer charges, fire, hazard or other insurance premiums and ground rents owing from time to time in connection with the Mortgaged Property.”

B-2

EX-10

EXHIBIT 10.45

Forest Ridge Apartments

GUARANTY

This Guaranty (the “Guaranty”) is made and entered into as of the 18^th day of January, 2007 by AIMCO PROPERTIES, L.P., a Delaware limited partnership (the “Guarantor”), for the benefit of CAPMARK FINANCE INC., a California corporation (“Lender”).

RECITALS

A.

Lender has agreed to execute both (i) that certain Amended and Restated Loan Agreement, dated as of September 16, 2002, by and among AIMCO Properties, L.P., a Delaware limited partnership, certain borrowers signatory thereto and Lender and (ii) that certain Loan Agreement dated as of November 1, 2002, by and among certain borrowers signatory thereto and Lender (as amended, supplemental or otherwise modified or amended and restated from time to time, the “Loan Agreement”),  pursuant to which, inter alia, Lender has agreed, subject to the terms, conditions and limitations of the Loan Agreement, to make a loan to VMS National Properties, an Illinois joint venture general partnership (the “Borrower”) from time to time loan to be evidenced by the Note (the “Loan”).  Terms used herein not defined herein have the definition given them in the Loan Agreement.

B.

The repayment of the Loan and all of the Obligations of the Borrower under the Loan Agreement or the other Loan Documents are guaranteed by this Guaranty to the extent of Borrower’s personal liability as provided in Section 9 of the Note evidencing the Loan, and except for such obligations described herein, Guarantor shall have no liability in connection with, or responsibility to perform, under or in accordance with the Loan Agreement or other Loan Documents.

C.

Guarantor owns, directly or indirectly, an ownership interest in the Borrower and will receive a direct and material benefit from the Loans to the Borrower.

D.

Lender is willing to make the Loan to the Borrower only if Guarantor agrees to enter into this Guaranty.

NOW, THEREFORE, in order to induce Lender to make the Loan to Borrower, and in consideration thereof, Guarantor hereby agrees as follows:

Section 1.

Definitions.  All capitalized terms used but not defined in this Guaranty shall have the meanings ascribed to such terms in the Loan Agreement.  The following terms shall have the meaning set forth below for purposes of this Guaranty:

“Material Adverse Effect” means, with respect to any circumstance, act, condition or event of whatever nature (including any adverse determination in any litigation, arbitration, or governmental investigation or proceeding), whether singly or in conjunction with any other event or events, act or acts, condition or conditions, or circumstance or circumstances, whether or not related, a material adverse change in or a materially adverse effect upon the present or future ability of the Guarantor, to the extent specifically referred to in the applicable provision of that Guaranty, to perform the Guaranteed Obligations.

“Net Worth” means, as of any date of determination and without double counting any item, the sum of the capital stock or other capital equity interests and additional paid-in capital

1

plus retained earnings (or minus accumulated deficits) of the Guarantor, the REIT and their respective Subsidiaries on a consolidated basis determined in conformity with GAAP.

“REIT” means Apartment Investment and Management Company, a Maryland corporation.

“Subsidiary” means, with respect to the REIT, the Guarantor or an Affiliate of either of them, a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise controlled, directly or indirectly, through one or more intermediaries, or both, by the REIT, the Guarantor or an Affiliate of either of them.

Section 2.

Guaranty of Payment.  Guarantor irrevocably, absolutely and unconditionally guarantees to Lender all of the following (collectively, the “Guaranteed Obligations”):  the due and punctual payment when due, whether at maturity or earlier, by reason of acceleration or otherwise, at all times, of all amounts for which Borrower is personally liable under Section 9 of the Note.

This Guaranty shall be an unconditional guaranty of payment and performance and not of collection, and is in no way conditioned upon any attempt by Lender to pursue or exhaust any remedy against Borrower.  This Guaranty is a continuing guaranty which shall remain in full force and effect until all of the Guaranteed Obligations have been paid and performed in full; and Guarantor shall not be released from any obligations to Lender under this Guaranty as long as any amount payable by the Borrower to Lender, or any obligation by the Borrower, under the Loan Documents is not performed, satisfied, settled or paid in full.

Section 3.

Form of Payment.  All payments under this Guaranty shall be made to Lender in immediately available funds, without reduction by any recoupment, set-off, counterclaim or cross-claim against Lender.

Section 4.

Guarantor’s Obligations are Absolute.  The obligations of Guarantor under this Guaranty shall be absolute and unconditional, shall not be subject to any counterclaim, set-off, recoupment, deduction, or defense based upon any claim Guarantor may have against Lender or Borrower and shall remain in full force and effect without regard to, and shall not be released, discharged or terminated or in any other way affected by, any circumstance or condition (whether or not Guarantor shall have any knowledge or notice thereof), including, without limitation:

(a)

any amendment or modification of, or extension of time for payment of any of the principal of, interest on or other amounts payable under the Loan Documents;

(b)

any exercise or non-exercise by Lender of any right, power or remedy under or in respect of the Loan Documents, or any waiver, consent, forbearance, indulgence or other action, inaction or omission by Lender under or in respect of the Loan Documents;

(c)

any assignment, sale or other transfer of Borrower’s interest in all or any part of the real or personal property which at any time constitutes collateral for the payment of the Guaranteed Obligations, including, without limitation, a conveyance of such property by Borrower to Lender by deed in lieu of foreclosure;

(d)

any bankruptcy, insolvency, reorganization, adjustment, dissolution, liquidation or other like proceeding involving or affecting Borrower or Lender or their respective properties or

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creditors, or any action taken with respect to the Loan Documents by any trustee or receiver of Borrower or Lender, or by any court, in any such proceeding;

(e)

any invalidity or unenforceability, in whole or in part, of any term or provision of the Loan Documents or Borrower’s incapacity or lack of authority to enter into the Loan Documents;

(f)

any release, compromise, settlement or discharge with respect to all or any portion of Borrower’s obligations under the Loan Documents;

(g)

any acceptance of additional or substituted collateral for payment of the Guaranteed Obligations or any release or subordination of any collateral held at any time by Lender as security for the payment of the Guaranteed Obligations; or

(h)

any resort to Guarantor for payment of all or any portion of the Guaranteed Obligations, whether or not Lender shall have resorted to any collateral securing the Guaranteed Obligations, if any, or shall have proceeded to pursue or exhaust its remedies against Borrower (or any other Person) primarily or secondarily liable for the Guaranteed Obligations.

No exercise, delay in exercise or non-exercise by Lender of any right hereby given it, no dealing by Lender with Borrower, Guarantor or any other Person, no change, impairment or suspension of any right or remedy of Lender, and no act or thing which, but for this provision, could act as a release or exoneration of the liabilities of Guarantor hereunder, shall in any way affect, decrease, diminish or impair any of the obligations of Guarantor hereunder or give Guarantor or any other Person any recourse or defense against Lender.

Section 5.

Waiver.  Guarantor unconditionally waives the following:

(a)

notice of acceptance of this Guaranty and notice of any of the matters referred to in Section 4 hereof;

(b)

all notices which may be required by statute, rule of law or otherwise to preserve intact any rights which Lender may have against Guarantor under this Guaranty, including, without limitation, any demand, proof or notice of non-payment of any of the principal of, interest on or other amounts payable under the Loan Documents, and notice of any failure on the part of Borrower to perform and comply with any covenant, agreement, term or condition of the Loan Documents;

(c)

any right to the enforcement, assertion or exercise of any right, power or remedy conferred upon Lender in the Loan Documents or otherwise;

(d)

any requirement that Lender act with diligence in enforcing its rights under the Loan Documents or this Guaranty;

(e)

any right to require Lender to proceed against or exhaust its recourse against Borrower or any security or collateral held by Lender, if any, at any time for the payment of the Guaranteed Obligations or to pursue any other remedy in its power before being entitled to payment from Guarantor under this Guaranty or before proceeding against Guarantor;

(f)

any failure by Lender to file or enforce a claim against the estate (either in administration, bankruptcy or any other proceeding) of Borrower or any other Person;

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(g)

any defense based upon an election of remedies by Lender which destroys or otherwise impairs the subrogation rights of Guarantor or the right of Guarantor (after payment of the Guaranteed Obligations) to proceed against Borrower for reimbursement, or both;

(h)

any defense based upon any taking, modification or release of any collateral for the Guaranteed Obligations, if any, or any failure to perfect any security interest in, or the taking of, or failure to take any other action with respect to, any collateral securing payment of the Guaranteed Obligations, if any;

(i)

any defense based upon the addition, substitution or release, in whole or in part, of any Person(s), including, without limitation, another guarantor, primarily or secondarily liable for or in respect of the Guaranteed Obligations;

(j)

any rights or defenses based upon an offset by Guarantor against any obligation now or hereafter owed to Guarantor by Borrower; and

(k)

all other notices which may or might be lawfully waived by Guarantor;

it being the intention hereof that Guarantor shall remain liable as principal, to the extent set forth in this Guaranty, until the payment and performance in full of the Guaranteed Obligations, notwithstanding any act, omission or thing which might otherwise operate as a legal or equitable discharge of Guarantor other than the payment and performance in full of the Guaranteed Obligations.  No delay by Lender in exercising any rights and/or powers hereunder or in taking any action to enforce Borrower’s obligations under the Loan Documents shall operate as a waiver as to such rights or powers or in any manner prejudice any and all of Lender’s rights and powers hereunder against Guarantor.  The intention of Guarantor under this Guaranty is that, so long as any of the Guaranteed Obligations remains unsatisfied, the obligations of Guarantor hereunder shall not be discharged except by performance and then only to the extent of such performance.  Guarantor agrees that Guarantor’s obligations hereunder shall not be affected by any circumstances, whether or not referred to in this Guaranty, which might constitute a legal or equitable discharge of a surety or guarantor.

Section 6.

Election of Remedies.  This Guaranty may be enforced from time to time, as often as occasion therefor may arise, and without any requirement that Lender must first pursue or exhaust any remedies available to it against Borrower under the Loan Documents or against any other Person or resort to any collateral at any time held by it for performance of the Guaranteed Obligations, if any, or any other source or means of obtaining payment of any of the Guaranteed Obligations.

Section 7.

Representations and Warranties of Guarantor.  Guarantor hereby represents and warrants to the Lender as follows:

(a)

Due Organization; Qualification.  Guarantor is qualified to transact business and is in good standing in the State in which it is organized and in each other jurisdiction in which such qualification and/or standing is necessary to the conduct of its business and where the failure to be so qualified would adversely affect the validity of, the enforceability of, or the ability of Guarantor to perform the Guaranteed Obligations.

(b)

Power and Authority.  Guarantor has the requisite power and authority (i) to own its properties and to carry on its business as now conducted and as contemplated to be conducted in connection with the performance of the Guaranteed Obligations, and (ii) to execute and deliver this Guaranty and to carry out the transactions contemplated by this Guaranty.

(c)

Due Authorization.  The execution, delivery and performance of this Guaranty has been duly authorized by all necessary action and proceedings by or on behalf of Guarantor,

4

and no further approvals or filings of any kind, including any approval of or filing with any Governmental Authority, are required by or on behalf of Guarantor as a condition to the valid execution, delivery and performance by Guarantor of this Guaranty.

(d)

Valid and Binding Obligations.  This Guaranty has been duly authorized, executed and delivered by Guarantor and constitutes the legal, valid and binding obligations of Guarantor, enforceable against Guarantor in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles affecting the enforcement of creditors’ rights generally or by equitable principles or by the exercise of discretion by any court.

(e)

Non-contravention: No Liens.  Neither the execution and delivery of this Guaranty, nor the fulfillment of or compliance with the terms and conditions of this Guaranty nor the payment or performance of the Guaranteed Obligations:

(i)

does or will conflict with or result in any breach or violation of any Applicable Law enacted or issued by any Governmental Authority or other agency having jurisdiction over Guarantor, any of the Mortgaged Properties or any other portion of the Collateral or assets of Guarantor, or any judgment or order applicable to Guarantor or to which Guarantor is subject;

(ii)

does or will conflict with or result in any material breach or violation of, or constitute a default under, any of the terms, conditions or provisions of Guarantor’s Organizational Documents, any indenture, existing agreement or other instrument to which Guarantor is a party or to which Guarantor, any of the Mortgaged Properties or any other portion of the Collateral or other assets of Guarantor is subject; or

(iii)

does or will require the consent or approval of any creditor of Guarantor, any Governmental Authority or any other Person except such consents or approvals which have already been obtained.

(f)

Pending Litigation or Other Proceedings.  Since the date of the most recent financial statements delivered to Lender pursuant to Section 8(b) of this Guaranty, there is no pending or, to the best knowledge of guarantor, threatened action, suit, proceeding or investigation, at law or in equity, before any court, board, body or official of any Governmental Authority or arbitrator which, if decided adversely to Guarantor, would have, or may reasonably be expected to have, a Material Adverse Effect on Guarantor. Guarantor is not in default with respect to any order of any Governmental Authority to any extent which would have, or may reasonably be expected to have, a Material Adverse Effect on Guarantor.

(g)

Solvency.  Guarantor is not insolvent and will not be rendered insolvent by the transaction contemplated by this Guaranty and after giving effect to such transaction, Guarantor will not be left with an unreasonably small amount of capital with which to engage in its business or undertakings, nor will Guarantor have incurred, have intended to incur, or believe that it has incurred, debts beyond its ability to pay such debts as they mature. Guarantor did not receive less than a reasonably equivalent value in exchange for incurrence of the Guaranteed Obligations.  There (i) is no contemplated, pending or, to the best of Guarantor’s knowledge, threatened bankruptcy, reorganization, receivership, insolvency or like proceeding, whether voluntary or involuntary, affecting Guarantor and (ii) has been no assertion or exercise of jurisdiction over Guarantor by any court empowered to exercise bankruptcy powers.

(h)

No Contractual Defaults.  There are no material defaults by Guarantor or, to the knowledge of Guarantor, by any other Person under any contract to which Guarantor is a party other than defaults which do not have, and are not reasonably be expected to have, a Material Adverse Effect on Guarantor.  Neither Guarantor nor, to the knowledge of Guarantor, any other

5

Person, has received notice or has any knowledge of any existing circumstances in respect of which it could receive any notice of default or breach in respect of any contracts, which default would have, or which may reasonably be expected to have, a Material Adverse Effect on Guarantor.

(i)

Representations True and Correct.  The representations and warranties made by Guarantor in this Guaranty are true, complete and correct in all material respects as of the Initial Closing Date and do not contain any untrue statement of material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.

(j)

ERISA.  Guarantor is in compliance in all material respects with all applicable provisions of ERISA and has not incurred any liability to the PBGC on a Plan under Title LV of ERISA.  None of the assets of Guarantor constitute plan assets (within the meaning of Department of Labor Regulation § 2510.3-101) of any employee benefit plan subject to Title I of ERISA.

(k)

Financial Information.  The financial statements of Guarantor which have been furnished to the Lender are complete and accurate in all material respects and present fairly the financial condition of Guarantor, as of its date in accordance with GAAP, applied on a consistent basis.  Since the date of the most recent of such financial statements no event has occurred which would have, or may reasonably be expected to have a Material Adverse Effect on Guarantor, except as disclosed in any filings made by Guarantor or its affiliates with the United States Securities and Exchange Commission (“SEC”).  Guarantor has no material contingent obligations which are not otherwise disclosed in its most recent financial statements except as disclosed in any filings made by Guarantor or its affiliates with the SEC.

(l)

Accuracy of Information.  No information, statement or report furnished in writing to the Lender by Guarantor concerning the Guarantor in connection with this Guaranty or any other Loan Document or in connection with the consummation of the transactions contemplated hereby and thereby contains any material misstatement of fact or omits to state a material fact necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading as of the date made, except to the extent that such misstatements and omissions when considered in the totality of such information, statements and reports furnished by Guarantor are not materially misleading in the aggregate; provided, however, the foregoing representation and warranty shall not apply to any information, statement or report prepared by any third party.

(m)

No Conflicts of Interest.  To the best knowledge of Guarantor, no member, officer, agent or employee of the Lender has been or is in any manner interested, directly or indirectly, in that Person’s own name, or in the name of any other Person, in the Guarantor (other than through the ownership of publicly traded shares of common stock of affiliates of the Guarantor or limited partnership units of Guarantor), the Loan Documents, or any Mortgaged Property, in any contract for property or materials to be furnished or used in connection with such Mortgaged Property or in any aspect of the transactions contemplated by the Loan Documents.

(n)

Governmental Approvals.  To the best of Guarantor’s knowledge, no Governmental Approval not already obtained or made is required for the execution and delivery of this Guaranty or the performance of the terms and provisions hereof by Guarantor.

(o)

Governmental Orders.  Guarantor is not presently under any cease or desist order or other orders of a similar nature, temporary or permanent, of any Governmental Authority which would have the effect of preventing or hindering performance of its duties hereunder, nor

6

are there any proceedings presently in progress or to its knowledge contemplated which would, if successful, lead to the issuance of any such order.

(p)

No Reliance.  Guarantor acknowledges, represents and warrants that it understands the nature and structure of the transactions contemplated by this Guaranty and the other Loan Documents; that it is familiar with the provisions of all of the documents and instruments relating to such transactions; that it understands the risks inherent in such transactions, including the risk of loss of all or any of the Mortgaged Properties; and that it has not relied on the Lender or Fannie Mae for any guidance or expertise in analyzing the financial or other consequences of the transactions contemplated by this Guaranty or any other Loan Document or otherwise relied on the Lender or Fannie Mae in any manner in connection with interpreting, entering into or otherwise in connection with this Guaranty, any other Loan Document or any of the matters contemplated hereby or thereby.

(q)

Compliance with Applicable Law.  Guarantor is in compliance with Applicable Law, including all Governmental Approvals, if any, except for such items of noncompliance that, singly or in the aggregate, have not had and are not reasonably expected to cause, a Material Adverse Effect on Guarantor.

(r)

Contracts with Affiliates.  Except for the management agreement relating to each of the Mortgaged Properties or in the ordinary course of business and on terms which are no less favorable to the Guarantor than would be obtained in a corporate arms-length transaction with an unrelated third party, Guarantor has not entered into and is not a party to any material contract, lease or other agreement with any Affiliate of Guarantor for the provision of any service, materials or supplies relating to any Mortgaged Property.

Section 8.

Affirmative Covenants of Guarantor.  Guarantor agrees and covenants with the Lender that, at all times during the Term of this Guaranty:

(a)

Maintenance of Existence.  Guarantor shall maintain its existence and continue to be a limited partnership organized under the laws of the state of its organization. Guarantor shall continue to be duly qualified to do business in each jurisdiction in which such qualification is necessary to the conduct of its business and where the failure to be so qualified would adversely affect the validity of, the enforceability of, or the ability to perform, its obligations under this Guaranty.

(b)

Financial Statements; Accountants’ Reports: Other Information.  The Guarantor shall keep and maintain at all times complete and accurate books of accounts and records in sufficient detail to correctly reflect all of the Guarantor’s financial transactions and assets. In addition, the Guarantor shall furnish, or cause to be furnished, to the Lender the following:

(i)

So long as Guarantor is a reporting company under the Securities and Exchange Act of 1934 (the “’34 Act”), promptly upon their becoming available, copies of (A) all 10K’s, 10Q’s, 8K’s, annual reports and proxy statements, and all replacement, substitute or similar filings or reports required to be filed after the date of this Guaranty by the SEC or other Governmental Authority exercising similar functions, and (B) all press releases and other statements made available generally by Guarantor to the public concerning material developments in the business of Guarantor.

(ii)

In the event Guarantor is not a reporting company under the ’34 Act,

(A)

Annual Financial Statements.  As soon as available, and in any event within 90 days after the close of its fiscal year during the Term of this Agreement, the audited balance sheet of Guarantor as of the end of such fiscal year, the audited statement of income, equity and retained earnings of Guarantor

7

for such fiscal year and the audited statement of cash flows of Guarantor for such fiscal year, all in reasonable detail and stating in comparative form the respective figures for the corresponding date and period in the prior fiscal year, prepared in accordance with GAAP, consistently applied, and accompanied by a certificate of Guarantor’s independent certified public accountants to the effect that such financial statements have been prepared in accordance with GAAP, consistently applied, and that such financial statements fairly present the results of its operations and financial condition for the periods and dates indicated with such certification to be free of exceptions and qualifications as to the scope of the audit or as to the going concern nature of the business.

(B)

Quarterly Financial Statements.  As soon as available, and in any event within 45 days after each of the first three fiscal quarters of each fiscal year during the Term of this Agreement, the unaudited balance sheet of Guarantor as of the end of such fiscal quarter, the unaudited statement of income and retained earnings of Guarantor and the unaudited statement of cash flows of Guarantor for the portion of the fiscal year ended with the last day of such quarter, all in reasonable detail and stating in comparative form the respective figures for the corresponding date and period in the previous fiscal year, accompanied by a certificate of a member of Senior Management (which certificate shall be without personal liability to such officer) stating that such financial statements have been prepared in accordance with GAAP, consistently applied, and fairly present th e results of its operations and financial condition for the periods and dates indicated subject to year end adjustments in accordance with GAAP.

(iii)

[Left blank intentionally]

(iv)

Other Reports.  Promptly upon receipt thereof, all schedules, financial statements or other similar reports delivered by the Guarantor pursuant to the Loan Documents or reasonably requested by the Lender with respect to the Guarantor’s business affairs or condition (financial or otherwise) subject to the confidentiality covenant set forth below.  

After the providing by Guarantor of any statement, report or other information on a collective basis to Standard & Poor’s, Moody’s Investors Service, Duff & Phelps, Fitch and/or any other rating agency, and/or after providing any statement, report or other information on a collective basis to the banks or other institutions providing unsecured lines of credit and loans to Guarantor, Guarantor shall promptly furnish such statement, report or other information to Lender.

As used in this Paragraph (iv), the phrase “on a collective basis” means as provided to a group as a whole as opposed to an individual basis, e.g.., providing information to a rating agency or to a bank to respond to a particular request of such rating agency or bank.

The Lender agrees to treat all Information received by it (I) under this Paragraph (iv) as confidential and (II) which Guarantor requests in writing to the Persons at the Lender who receive any Information regarding Guarantor that such information be treated as confidential; provided, however, that such Information may be disclosed (A) as required by law, (B) to officers, directors, employees, agents, partners, attorneys, auditors, accountants, engineers and other consultants of the Lender, or its successors or assigns, who need to know such Information, provided such Persons are instructed to treat such Information confidentially, (C) by the Lender to any successor or assign of such Person, (D) to any federal or state regulatory authority having jurisdiction over the Lender, or its successors or assigns, (E) to any other Person to which such delivery or

8

disclosure may be necessary or appropriate (w) in compliance with any law, rule, regulation or order applicable to the Lender, or its successors or assigns, (x) in response to any subpoena or other legal process or information investigative demand, or (y) in connection with any litigation to which the Lender, or its successors or assigns, is a party.  Guarantor agrees that Information subject to this Paragraph (iv) does not include information which (I) was publicly known, or otherwise known to the Lender, or its successors or assigns, at the time of disclosure, (II) subsequently becomes publicly known through no act of or omission by the Lender or its successors or assigns, other than through disclosure by Guarantor or by any other Person in violation of this Paragraph (iv) or  any other confidentiality arrangement and the Lender, or its successors or assigns, has knowledge of suc h violation; provided, however, that in the event the disclosing Person shall reasonably endeavor to notify Guarantor thereof as soon as possible after such disclosure has been made and Guarantor shall be afford an opportunity to seek protective orders, or such other confidential treatment of such Information as Guarantor may deem reasonable.  

(v)

Certification.  All certifications required to be delivered pursuant to this Section 8(b) shall run directly to and be for the benefit of Lender and Fannie Mae.

(c)

Maintain Licenses.  Guarantor shall procure and maintain in full force and effect all licenses, Permits, charters and registrations which are material to the conduct of its business and shall abide by and satisfy all terms and conditions of all such licenses, Permits, charters and registrations.

(d)

Access to Records; Discussions With Senior Management.  To the extent permitted by law, Guarantor shall permit the Lender to:

(i)

inspect Guarantor’s books and records related to the Borrower and the Mortgaged Property;

(ii)

discuss Guarantor’s affairs, finances and accounts with Guarantor’s Senior Management or, provided that Senior Management of Guarantor has been given the opportunity by Lender to be a party to such discussions, property managers and independent public accountants;

(iii)

provided that Senior Management of Guarantor has been given the opportunity by Lender to be a party to such discussions, discuss the Mortgaged Properties’ conditions, operations or maintenance with the managers of such Mortgaged Properties and the officers and employees of Guarantor; and

(iv)

receive any other information that the Lender deems reasonably necessary or relevant in connection with the Guaranty, any Loan Document or the Guaranteed Obligations.

Notwithstanding the foregoing, prior to an Event of Default or Potential Event of Default, all inspections shall be conducted at reasonable times during normal business hours and upon reasonable notice to the Guarantor.

(e)

Inform the Lender of Material Events.  Guarantor shall promptly, but in any event within five (5) Business Days, inform the Lender in writing of any of the following (and shall deliver to the Lender copies of any related written communications, complaints, orders, judgments and other documents relating to the following) of which Guarantor has actual knowledge:

9

(i)

Defaults.  The occurrence of any Event of Default or any Potential Event of Default under any Loan Document;

(ii)

Bankruptcy Proceedings.  The commencement of any proceedings by or against Guarantor under any applicable bankruptcy, reorganization, liquidation, insolvency or other similar law now or hereafter in effect or of any proceeding in which a receiver, liquidator, trustee or other similar official is sought to be appointed for it;

(iii)

Accounting Changes.  Any material change in Guarantor’s accounting policies or financial reporting practices; and

(iv)

Restructuring of Guarantor.  Any restructuring or reorganization of any Guarantor.

(f)

ERISA.  Guarantor shall at all times remain in compliance in all material respects with all applicable provisions of ERISA and similar requirements of the PBGC.

(g)

Further Assurances.  Provided they do not materially increase the Guaranteed Obligations of Guarantor, Guarantor, at the request of the Lender, but without incurring any liability beyond the Guaranteed Obligations, shall execute and deliver and, if necessary, file or record such statements, documents, agreements, UCC financing and continuation statements and such other instruments and take such further action as the Lender from time to time may request as reasonably necessary, desirable or proper to carry out more effectively the purposes of this Guaranty or any of the other Loan Documents or to subject the Collateral to the lien and security interests of the Loan Documents or to evidence, perfect or otherwise implement, to assure the lien and security interests intended by the terms of the Loan Documents or in order to exercise or enforce its rights under the Loan Documents.

(h)

Monitoring Compliance.  Upon the request of the Lender, but without incurring any liability beyond the Guaranteed Obligations, from time to time, Guarantor shall promptly provide to the Lender such documents, certificates and other information as may be deemed reasonably necessary to enable the Lender to perform its functions under the Servicing Agreement as the same relates to the Guarantor.

Section 9.

Negative Covenants of Guarantor.

(a) Liquidation. Guarantor shall not dissolve or liquidate in whole or in part.

(b) Principal Place of Business. Guarantor shall not change its principal place of business or the location of its books and records without first giving 10 days' prior written notice to the Lender.

Section 10. Financial Covenants. Guarantor agrees and covenants with the Lender that, at all times during the Term of this Guaranty, the Net Worth of the REIT, the Guarantor and the Subsidiaries on a consolidated basis shall not be below $1,500,000,000.

Section 11.

Expenses.  Guarantor agrees to pay all reasonable costs and out-of-pocket expenses, including court costs and expenses and the reasonable fees and disbursements of legal counsel, incurred by or on behalf of Lender in connection with the enforcement of Guarantor’s obligations under this Guaranty or the protection of Lender’s rights under this Guaranty. The covenants contained in this Section shall survive the payment of the Guaranteed Obligations.

Section 12.

Condition of Borrower.  Guarantor is fully aware of the financial condition of Borrower and is executing and delivering this Guaranty based solely upon

10

Guarantor’s own independent investigation of all matters pertinent hereto and is not relying in any manner upon any representation or statement made by Lender. Guarantor represents and warrants that Guarantor is in a position to obtain, and Guarantor hereby assumes full responsibility for obtaining, any additional information concerning Borrower’s financial condition and any other matters pertinent hereto as Guarantor may desire and Guarantor is not relying upon or expecting Lender to furnish to Guarantor any information now or hereafter in Lender’s possession concerning the same or any other matter. By executing this Guaranty, Guarantor knowingly accepts the full range of risks encompassed within a contract of this type, which risks Guarantor acknowledges.

Section 13.

Further Assurances.  Guarantor agrees at any time and from time to time upon request by Lender to take, or cause to be taken, any action and to execute and deliver any additional documents which, in the reasonable opinion of Lender, may be necessary in order to assure to Lender the full benefits of this Guaranty, so long as any such action does not materially increase Guarantor’s Guaranteed Obligations hereunder or materially decrease its rights hereunder.

Section 14.

Subordination.  Guarantor hereby irrevocably and unconditionally agrees that any claims, direct or indirect, Guarantor may have by subrogation or other form of reimbursement, against Borrower or to any security or any interest therein, by virtue of this Guaranty or as a consequence of any payment made by Guarantor pursuant to this Guaranty, shall be fully subordinated in time and right of payment to the payment in full of the Guaranteed Obligations and all other obligations of Guarantor to Lender under this Guaranty.

Section 15.

No Subrogation.  Guarantor shall not have any right of subrogation against Borrower by reason of any payment by Guarantor under this Guaranty until such time as all of the Guaranteed Obligations have been satisfied in full. Nothing in the foregoing shall affect any claim which any Guarantor has against Borrower under the terms of the Organizational Documents of the Borrower.

Section 16.

Insolvency and Liability of Borrower.  So long as any of the Guaranteed Obligations is unpaid and this Guaranty is in effect, and to the extent not prohibited by the applicable bankruptcy court, Guarantor agrees to file all claims against Borrower in any bankruptcy or other proceeding in which the filing of claims is required by law in connection with indebtedness owed by Borrower to Guarantor and to assign to Lender all rights of Guarantor thereunder up to the lesser of (i) the amount of such indebtedness or (ii) the amount of the Guaranteed Obligations.  In all such cases the Person or Persons authorized to pay such claims shall pay to Lender the full amount thereof to the full extent necessary to pay the Guaranteed Obligations, and Guarantor hereby assigns to Lender all of Guarantor’s rights to all such payments to which Guarantor would otherwise be entitled. Notw ithstanding the foregoing, and except to the extent that any sums owed by Borrower to Lender under the Loan Documents shall have been fully satisfied thereby, the liability of Guarantor hereunder shall in no way be affected by

(a)

the release or discharge of Borrower in any creditors’, receivership, bankruptcy or other proceedings; or

(b)

the impairment, limitation or modification of the liability of Borrower or the estate of Borrower in bankruptcy resulting from the operation of any present or future provisions of the Bankruptcy Code or other statute or from the decision in any court.

Section 17.

Preferences, Fraudulent Conveyances, Etc.  If Lender is required to refund, or voluntarily refunds, any payment received from Borrower because such payment is or may be avoided, invalidated, declared fraudulent, set aside or determined to be void or voidable as a preference, fraudulent conveyance, impermissible setoff or a diversion of trust funds under

11

the bankruptcy laws or for any similar reason, including, without limitation, any judgment, order or decree of any court or administrative body having jurisdiction over Lender or any of its property, or any settlement or compromise of any claim effected by Lender with Borrower or other claimant (a “Rescinded Payment”), then Guarantor’s liability to Lender shall continue in full force and effect, or Guarantor’s liability to Lender shall be reinstated, as the case may be, with the same effect and to the same extent as if the Rescinded Payment had not been received by Lender (but only to the extent such Rescinded Payment was part of the Guaranteed Obligations hereunder), notwithstanding the cancellation or termination of any Note or any of the other Loan Documents. In addition, Guarantor shall pay, or reimburse Lender for, all expenses (including all reasona ble attorneys’ fees, court costs and related disbursements) incurred by Lender in the defense of any claim that a payment received by Lender in respect of all or any part of the Guaranteed Obligations from Guarantor must be refunded. The provisions of this Section shall survive the termination of this Guaranty and any satisfaction and discharge of Borrower by virtue of any payment, court order or any federal or state law.

Section 18.

Waiver.  Neither this Guaranty nor any term hereof may be changed, waived, discharged or terminated except by an instrument in writing signed by Lender and Guarantor expressly referring to this Guaranty and to the provisions so changed or limited. No such waiver shall extend to or affect any obligation not expressly waived or impair any right consequent thereon. No course of dealing or delay or omission on the part of Lender in exercising any right under this Guaranty shall operate as a waiver thereof or otherwise by prejudice thereto.

Section 19.

Notices.  All notices or other communications hereunder shall be sufficiently given and shall be deemed given when sent in the manner prescribed by the Loan Agreement addressed to the parties as follows:

As to the Guarantor:

AIMCO

Stanford Place 3

4582 South Ulster St. Parkway

Suite 1100

Denver, Colorado  80237

Attn:  Senior Vice President-Debt & Securities

with a copy to:

Ballard Spahr Andrews & Ingersoll, LLP

Seventeenth Street Plaza Building

1225 17^th Street, Suite 2300

Denver, Colorado 80202

Attn:  Gwendolyn C. Allen, Esquire

If to Lender or Fannie Mae:

As provided in the Loan Agreement.

Section 20.

Assignability by Lender.  Lender may, without notice to Guarantor, assign or transfer the Loans and the Loan Documents, in whole or in part. In such event, each and every immediate and successive assignee, transferee or holder of all or any part of the Loans and the Loan Documents shall have the right to enforce this Guaranty, by legal action or otherwise, as fully as if such assignee, transferee, or holder were by name specifically given such right and power in this Guaranty. Lender shall have an unimpaired right to enforce this Guaranty for its benefit as to so much of the Loans and the Loan Documents as Lender has not sold, assigned or transferred.

12

Section 21.

Guarantor Bound by Judgment Against Borrower.  Guarantor shall be conclusively bound, in any jurisdiction, by the judgment in any action by Lender against Borrower in connection with the Loan Documents (wherever instituted) as if Guarantor were a party to such action even if not so joined as a party.

Section 22.

Governing Law.  The provisions of Section 11.06 of the Loan Agreement (entitled Choice of Law; Consent to Jurisdiction; Waiver of Jury Trial) are hereby incorporated into this Agreement by this reference to the fullest extent as if the text of such Section were set forth in its entirety herein.

Section 23.

Invalid Provisions.  If any provision of this Guaranty or the application thereof to Guarantor or any circumstance in any jurisdiction whose laws govern this Guaranty shall, to any extent, be invalid or unenforceable under any applicable statute, regulation or rule of law, then such provision shall be deemed inoperative to the extent of such invalidity or unenforceability and shall be deemed modified to conform to such statute, regulation or rule or law. The remainder of this Guaranty and the application of any such invalid or unenforceable provision to parties, jurisdictions or circumstances other than those to whom or to which it is held invalid or unenforceable, shall not be affected by such invalidity or unenforceability nor shall such invalidity or unenforceability affect the validity or enforceability of any other provision of this Guaranty.

Section 24.

General Provisions.  This Guaranty shall be binding upon the respective successors and assigns of Guarantor, and shall inure to the benefit of Lender and its successors and assigns, including, without limitation, each successive holder of the Note. The descriptive headings of the Sections of the Guaranty have been inserted herein for convenience of reference only and shall not define or limit the provisions hereof.

ATTACHED EXHIBITS.  The following Exhibits are attached to this Instrument:

X Exhibit A Modifications to Guaranty

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]

13

IN WITNESS WHEREOF, Guarantor has signed this Guaranty under seal as of the day and year first above written.

AIMCO PROPERTIES, L.P., a Delaware limited partnership

By:  AIMCO-GP, Inc., a Delaware corporation, its general partner

By:    /s/Patti K. Fielding

Patti K. Fielding

Executive Vice President and Treasurer

14

EXHIBIT A

MODIFICATIONS TO GUARANTY

The following modifications are hereby made to the text of the Guaranty that precedes this Exhibit:

1.

A new Section 25 is hereby added as follows:

“Section 25.

Additional Guaranty Relating to Bankruptcy.  

(a)

Notwithstanding any limitation on liability provided for elsewhere in this Guaranty, Guarantor hereby absolutely, unconditionally and irrevocably guarantees to Lender the full and prompt payment when due, whether at the maturity date or earlier, by reason of acceleration or otherwise, and at all times thereafter, the entire Indebtedness, in the event that:

(i)

Borrower voluntarily files for bankruptcy protection under the United States Bankruptcy Code; or

(ii)

Borrower voluntarily becomes subject to any reorganization, receivership, insolvency proceeding, or other similar proceeding pursuant to any other federal or state law affecting debtor and creditor rights; or

(iii)

an order of relief is entered against Borrower pursuant to the United States Bankruptcy Code or other federal or state law affecting debtor and creditor rights in any involuntary bankruptcy proceeding initiated or joined in by a "Related Party."  

(b)

For purposes of this Section, the term "Related Party" means:

(i)

Borrower or Guarantor; and

(ii)

any person or entity that holds, directly or indirectly, any ownership interest in or right to manage Borrower or Guarantor, including without limitation, any shareholder, member or partner of Borrower or Guarantor; and

(iii)

any person or entity in which any ownership interest (direct or indirect) or right to manage is held by Borrower, Guarantor or any partner, shareholder or member of, or any other person or entity holding an interest in, Borrower or Guarantor; and

(iv)

any other creditor of Borrower that is related by blood, marriage or adoption to Borrower, Guarantor or any partner, shareholder or member of, or any

PAGE A-1

other person or entity holding an interest in, Borrower or Guarantor.  

If Borrower, Guarantor or any Related Party has solicited creditors to initiate or participate in any proceeding referred to in this Section, regardless of whether any of the creditors solicited actually initiates or participates in the proceeding, then such proceeding shall be considered as having been initiated by a Related Party.”

_____________

INITIALS

PAGE A-2

EX-10

EXHIBIT 10.46

Prepared by, and after recording

return to:

Brian J. Iwashyna, Esquire

Troutman Sanders LLP

P.O. Box 1122

Richmond, Virginia  23218-1122

MULTIFAMILY MORTGAGE,

ASSIGNMENT OF RENTS

AND SECURITY AGREEMENT

(INDIANA)

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -

Form 4015

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INDIANA

Ó 1997-2001 Fannie Mae

TABLE OF CONTENTS

PAGE

1.

DEFINITIONS

2.

UNIFORM COMMERCIAL CODE SECURITY AGREEMENT

3.

ASSIGNMENT OF RENTS; APPOINTMENT OF RECEIVER; LENDER IN POSSESSION.

4.

ASSIGNMENT OF LEASES; LEASES AFFECTING THE MORTGAGED PROPERTY.

5.

PAYMENT OF INDEBTEDNESS; PERFORMANCE UNDER LOAN DOCUMENTS; PREPAYMENT PREMIUM  

6.

EXCULPATION

7.

DEPOSITS FOR TAXES, INSURANCE AND OTHER CHARGES

8.

COLLATERAL AGREEMENTS

9.

APPLICATION OF PAYMENTS

10.

COMPLIANCE WITH LAWS

11.

USE OF PROPERTY

12.

PROTECTION OF LENDER'S SECURITY

13.

INSPECTION

14.

BOOKS AND RECORDS; FINANCIAL REPORTING

15.

TAXES; OPERATING EXPENSES

16.

LIENS; ENCUMBRANCES

17.

PRESERVATION, MANAGEMENT AND MAINTENANCE OF MORTGAGED PROPERTY.

18.

ENVIRONMENTAL HAZARDS.

19.

PROPERTY AND LIABILITY INSURANCE.

20.

CONDEMNATION.

21.

TRANSFERS OF THE MORTGAGED PROPERTY OR INTERESTS IN BORROWER.

22.

EVENTS OF DEFAULT

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -

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23.

REMEDIES CUMULATIVE

24.

FORBEARANCE

25.

LOAN CHARGES

26.

WAIVER OF STATUTE OF LIMITATIONS.

27.

WAIVER OF MARSHALLING

28.

FURTHER ASSURANCES

29.

ESTOPPEL CERTIFICATE

30.

GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE

31.

NOTICE

32.

SALE OF NOTE; CHANGE IN SERVICER

33.

SINGLE ASSET BORROWER

34.

SUCCESSORS AND ASSIGNS BOUND

35.

JOINT AND SEVERAL LIABILITY

36.

RELATIONSHIP OF PARTIES; NO THIRD PARTY BENEFICIARY

37.

SEVERABILITY; AMENDMENTS

38.

CONSTRUCTION

39.

LOAN SERVICING

40.

DISCLOSURE OF INFORMATION

41.

NO CHANGE IN FACTS OR CIRCUMSTANCES

42.

SUBROGATION

43.

ACCELERATION; REMEDIES

44.

PREPARATION AND FILING OF FINANCING STATEMENTS

45.

RELEASE

46.

WAIVER OF VALUATION AND APPRAISEMENT

47.

WAIVER OF TRIAL BY JURY

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -

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INDIANA

Ó 1997-2001 Fannie Mae

Northpark Apartments

MULTIFAMILY MORTGAGE,

ASSIGNMENT OF RENTS

AND SECURITY AGREEMENT

THIS MULTIFAMILY MORTGAGE, ASSIGNMENT OF RENTS AND SECURITY AGREEMENT (the “Instrument”) is dated as of the 18th day of January, 2007, between VMS NATIONAL PROPERTIES, a joint venture general partnership organized and existing under the laws of Illinois, whose address is c/o AIMCO, Stanford Place 3, 4582 South Ulster Street Parkway, Suite 1100, Denver, Colorado 80237, as mortgagor (“Borrower”), and CAPMARK FINANCE INC., a corporation organized and existing under the laws of California, whose address is 116 Welsh Road, Horsham, Pennsylvania 19044, Attn: Servicing-Executive Vice President, as mortgagee (“Lender”).

Borrower is indebted to Lender in the principal amount of $6,512,869.00, as evidenced by Borrower’s Multifamily Note payable to Lender dated as of the date of this Instrument, and maturing as set forth in the Loan Agreement.

TO SECURE TO LENDER the repayment of the Indebtedness, and all renewals, extensions and modifications of the Indebtedness, and the performance of the covenants and agreements of Borrower contained in the Loan Documents, Borrower mortgages, warrants, grants, conveys and assigns to Lender the Mortgaged Property, including the Land located in the County of Vanderburgh, State of Indiana and described in Exhibit A attached to this Instrument.

Borrower represents and warrants that Borrower is lawfully seized of the Mortgaged Property and has the right, power and authority to mortgage, grant, convey and assign the Mortgaged Property, and that the Mortgaged Property is unencumbered.  Borrower covenants that Borrower will warrant and defend generally the title to the Mortgaged Property against all claims and demands, subject to any easements and restrictions listed in a schedule of exceptions to coverage in any title insurance policy issued to Lender contemporaneously with the execution and recordation of this Instrument and insuring Lender's interest in the Mortgaged Property.

Covenants.  Borrower and Lender covenant and agree as follows:

1.

1. DEFINITIONS. The following terms, when used in this Instrument (including when used in the above recitals), shall have the following meanings:

(a)

(a) "Borrower" means all persons or entities identified as "Borrower" in the first paragraph of this Instrument, together with their successors and assigns.

(b)

(b) "Collateral Agreement" means any separate agreement between Borrower and Lender for the purpose of establishing replacement reserves for the Mortgaged Property, establishing a fund to assure completion of repairs or improvements specified in that agreement, or assuring reduction of the outstanding principal balance of the Indebtedness if the occupancy of or income from the Mortgaged Property does not increase to a level specified in that agreement, or any other agreement or agreements between Borrower and Lender which provide for the establishment of any other fund, reserve or account.

(c)

(c) "Environmental Permit" means any permit, license, or other authorization issued under any Hazardous Materials Law with respect to any activities or businesses conducted on or in relation to the Mortgaged Property.

(d)

(d) "Event of Default" means the occurrence of any event listed in Section 22.

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -

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(e)

(e) "Fixtures" means all property which is so attached to the Land or the Improvements as to constitute a fixture under applicable law, including: machinery, equipment, engines, boilers, incinerators, installed building materials; systems and equipment for the purpose of supplying or distributing heating, cooling, electricity, gas, water, air, or light; antennas, cable, wiring and conduits used in connection with radio, television, security, fire prevention, or fire detection or otherwise used to carry electronic signals; telephone systems and equipment; elevators and related machinery and equipment; fire detection, prevention and extinguishing systems and apparatus; security and access control systems and apparatus; plumbing systems; water heaters, ranges, stoves, microwave ovens, refrigerators, dishwashers, garbage disposers, washers, dryers and other appliances; light fixtures, awnings, storm windows and storm doors; pictures, screens, blinds, shades, curtains and curtain rods; mirrors; c abinets, paneling, rugs and floor and wall coverings; fences, trees and plants; swimming pools; and exercise equipment.

(f)

(f) "Governmental Authority" means any board, commission, department or body of any municipal, county, state or federal governmental unit, or any subdivision of any of them, that has or acquires jurisdiction over the Mortgaged Property or the use, operation or improvement of the Mortgaged Property.

(g)

(g) "Hazardous Materials" means petroleum and petroleum products and compounds containing them, including gasoline, diesel fuel and oil; explosives; flammable materials; radioactive materials; polychlorinated biphenyls ("PCBs") and compounds containing them; lead and lead-based paint; asbestos or asbestos-containing materials in any form that is or could become friable; underground or above-ground storage tanks, whether empty or containing any substance; any substance the presence of which on the Mortgaged Property is prohibited by any federal, state or local authority; any substance that requires special handling; and any other material or substance now or in the future defined as a "hazardous substance," "hazardous material," "hazardous waste," "toxic substance," "toxic pollutant," "contaminant," or "pollutant" within the meaning of any Hazardous Materials Law.

(h)

(h) "Hazardous Materials Laws" means all federal, state, and local laws, ordinances and regulations and standards, rules, policies and other governmental requirements, administrative rulings and court judgments and decrees in effect now or in the future and including all amendments, that relate to Hazardous Materials and apply to Borrower or to the Mortgaged Property. Hazardous Materials Laws include, but are not limited to, the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., the Toxic Substance Control Act, 15 U.S.C. Section 2601, et seq., the Clean Water Act, 33 U.S.C. Section 1251, et seq., and the Hazardous Materials Transportation Act, 49 U.S.C. Section 5101, et seq., and their state analogs.

(i)

(i) "Impositions" and "Imposition Deposits" are defined in Section 7(a).

(j)

(j) "Improvements" means the buildings, structures, improvements, and alterations now constructed or at any time in the future constructed or placed upon the Land, including any future replacements and additions.

(k)

(k) "Indebtedness" means the principal of, interest on, and all other amounts due at any time under, the Note, this Instrument or any other Loan Document, including prepayment premiums, late charges, default interest, and advances as provided in Section 12 to protect the security of this Instrument.

(l)

(l) [Intentionally omitted]

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -

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Ó 1997-2001 Fannie Mae

(m)

(m) "Key Principal" means the natural person(s) or entity identified as such at the foot of this Instrument, and any person or entity who becomes a Key Principal after the date of this Instrument and is identified as such in an amendment or supplement to this Instrument.

(n)

(n) "Land" means the land described in Exhibit A.

(o)

(o) "Leases" means all present and future leases, subleases, licenses, concessions or grants or other possessory interests now or hereafter in force, whether oral or written, covering or affecting the Mortgaged Property, or any portion of the Mortgaged Property (including proprietary leases or occupancy agreements if Borrower is a cooperative housing corporation), and all modifications, extensions or renewals.

(p)

(p) "Lender" means the entity identified as "Lender" in the first paragraph of this Instrument and its successors and assigns, or any subsequent holder of the Note.

(q)

(q) "Loan Documents" means the Note, this Instrument, all guaranties, all indemnity agreements, all Collateral Agreements, O&M Programs, and any other documents now or in the future executed by Borrower, Key Principal, any guarantor or any other person in connection with the loan evidenced by the Note, as such documents may be amended from time to time.

(r)

(r) "Loan Servicer" means the entity that from time to time is designated by Lender to collect payments and deposits and receive notices under the Note, this Instrument and any other Loan Document, and otherwise to service the loan evidenced by the Note for the benefit of Lender.  Unless Borrower receives notice to the contrary, the Loan Servicer is the entity identified as "Lender" in the first paragraph of this Instrument.

(s)

(s) "Mortgaged Property" means all of Borrower's present and future right, title and interest in and to all of the following:

(1)

the Land;

(2)

the Improvements;

(3)

the Fixtures;

(4)

the Personalty;

(5)

all current and future rights, including air rights, development rights, zoning rights and other similar rights or interests, easements, tenements, rights-of-way, strips and gores of land, streets, alleys, roads, sewer rights, waters, watercourses, and appurtenances related to or benefitting the Land or the Improvements, or both, and all rights-of-way, streets, alleys and roads which may have been or may in the future be vacated;

(6)

all proceeds paid or to be paid by any insurer of the Land, the Improvements, the Fixtures, the Personalty or any other part of the Mortgaged Property, whether or not Borrower obtained the insurance pursuant to Lender’s requirement;

(7)

all awards, payments and other compensation made or to be made by any municipal, state or federal authority with respect to the Land, the Improvements, the Fixtures, the Personalty or any other part of the Mortgaged Property, including any awards or settlements resulting from condemnation proceedings or the total or partial taking of the Land, the

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -

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Improvements, the Fixtures, the Personalty or any other part of the Mortgaged Property under the power of eminent domain or otherwise and including any conveyance in lieu thereof;

(8)

all contracts, options and other agreements for the sale of the Land, the Improvements, the Fixtures, the Personalty or any other part of the Mortgaged Property entered into by Borrower now or in the future, including cash or securities deposited to secure performance by parties of their obligations;

(9)

all proceeds from the conversion, voluntary or involuntary, of any of the above into cash or liquidated claims, and the right to collect such proceeds;

(10)

all Rents and Leases;

(11)

all earnings, royalties, accounts receivable, issues and profits from the Land, the Improvements or any other part of the Mortgaged Property, and all undisbursed proceeds of the loan secured by this Instrument and, if Borrower is a cooperative housing corporation, maintenance charges or assessments payable by shareholders or residents;

(12)

all Imposition Deposits;

(13)

all refunds or rebates of Impositions by any municipal, state or federal authority or insurance company (other than refunds applicable to periods before the real property tax year in which this Instrument is dated);

(14)

all tenant security deposits which have not been forfeited by any tenant under any Lease; and

(15)

all names under or by which any of the above Mortgaged Property may be operated or known, and all trademarks, trade names, and goodwill relating to any of the Mortgaged Property.

(t)

(t) "Note" means the Multifamily Note described on page 1 of this Instrument, including the Acknowledgment and Agreement of Key Principal to Personal Liability for Exceptions to Non-Recourse Liability (if any), and all schedules, riders, allonges and addenda, as such Multifamily Note may be amended from time to time.

(u)

(u) "O&M Program" is defined in Section 18(a).

(v)

(v) "Personalty" means all equipment, inventory, general intangibles which are used now or in the future in connection with the ownership, management or operation of the Land or the Improvements or are located on the Land or in the Improvements, including furniture, furnishings, machinery, building materials, appliances, goods, supplies, tools, books, records (whether in written or electronic form), computer equipment (hardware and software) and other tangible personal property (other than Fixtures) which are used now or in the future in connection with the ownership, management or operation of the Land or the Improvements or are located on the Land or in the Improvements, and any operating agreements relating to the Land or the Improvements, and any surveys, plans and specifications and contracts for architectural, engineering and construction services relating to the Land or the Improvements and all other intangible property and rights relating to the operation of, or used in connection wi th,

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -

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the Land or the Improvements, including all governmental permits relating to any activities on the Land.

(w)

(w) "Property Jurisdiction" is defined in Section 30(a).

(x)

(x) "Rents" means all rents (whether from residential or non-residential space), revenues and other income of the Land or the Improvements, including subsidy payments received from any sources (including, but not limited to payments under any Housing Assistance Payments Contract) parking fees, laundry and vending machine income and fees and charges for food, health care and other services provided at the Mortgaged Property, whether now due, past due, or to become due, and deposits forfeited by tenants.

(y)

(y) "Taxes" means all taxes, assessments, vault rentals and other charges, if any, general, special or otherwise, including all assessments for schools, public betterments and general or local improvements, which are levied, assessed or imposed by any public authority or quasi-public authority, and which, if not paid, will become a lien, on the Land or the Improvements.

(z)

(z) "Transfer" means (A) a sale, assignment, transfer or other disposition (whether voluntary, involuntary or by operation of law); (B) the granting, creating or attachment of a lien, encumbrance or security interest (whether voluntary, involuntary or by operation of law); (C) the issuance or other creation of an ownership interest in a legal entity, including a partnership interest, interest in a limited liability company or corporate stock; (D) the withdrawal, retirement, removal or involuntary resignation of a partner in a partnership or a member or manager in a limited liability company; or (E) the merger, dissolution, liquidation, or consolidation of a legal entity.  "Transfer" does not include (i) a conveyance of the Mortgaged Property at a judicial or non-judicial foreclosure sale under this Instrument or (ii) the Mortgaged Property becoming part of a bankruptcy estate by operation of law under the United States Bankruptcy Code.  For purposes of defining the term & quot;Transfer," the term "partnership" shall mean a general partnership, a limited partnership, a joint venture and a limited liability partnership, and the term "partner" shall mean a general partner, a limited partner and a joint venturer.

2.

2. UNIFORM COMMERCIAL CODE SECURITY AGREEMENT.  This Instrument is also a security agreement under the Uniform Commercial Code for any of the Mortgaged Property which, under applicable law, may be subject to a security interest under the Uniform Commercial Code, whether acquired now or in the future, and all products and cash and non-cash proceeds thereof (collectively, "UCC Collateral"), and Borrower hereby grants to Lender a security interest in the UCC Collateral.  Borrower hereby authorizes Lender to file financing statements, continuation statements and financing statement amendments, in such form as Lender may require to perfect or continue the perfection of this security interest and Borrower agrees, if Lender so requests, to execute and deliver to Lender such financing statements, continuation statements and amendments.  Borrower shall pay all filing costs and all costs and expenses of any record searches for financing statements that Le nder may require.  Without the prior written consent of Lender, Borrower shall not create or permit to exist any other lien or security interest in any of the UCC Collateral.  If an Event of Default has occurred and is continuing, Lender shall have the remedies of a secured party under the Uniform Commercial Code, in addition to all remedies provided by this Instrument or existing under applicable law.  In exercising any remedies, Lender may exercise its remedies against the UCC Collateral separately or together, and in any order, without in any way affecting the availability of Lender's other remedies.  This Instrument constitutes a financing statement with respect to any part of the Mortgaged Property which is or may become a Fixture.

3.

3. ASSIGNMENT OF RENTS; APPOINTMENT OF RECEIVER; LENDER IN POSSESSION.

(a)

(a) As part of the consideration for the Indebtedness, Borrower absolutely and unconditionally assigns and transfers to Lender all Rents.  It is the intention of Borrower to establish a present, absolute and irrevocable transfer and assignment to Lender of all Rents and to authorize and empower Lender to collect and receive all Rents without the necessity of further action on the part of Borrower.  Promptly upon request by Lender, Borrower agrees to execute and deliver such further assignments as Lender may from time to time require.  Borrower and Lender intend this assignment of Rents to be immediately effective and to constitute an absolute present assignment and not an assignment for additional security only.  For purposes of giving effect to this absolute assignment of Rents, and for no other purpose, Rents shall not be deemed to be a part of the "Mortgaged Property," as that term is defined in Section 1(s).  However, if this present, absolute and unconditional assignme nt of Rents is not enforceable by its terms under the laws of the Property Jurisdiction, then the Rents shall be included as a part of the Mortgaged Property and it is the intention of the Borrower that in this circumstance this Instrument create and perfect a lien on Rents in favor of Lender, which lien shall be effective as of the date of this Instrument.

(b)

(b) After the occurrence of an Event of Default, Borrower authorizes Lender to collect, sue for and compromise Rents and directs each tenant of the Mortgaged Property to pay all Rents to, or as directed by, Lender, and Borrower shall, upon Borrower’s receipt of any Rents from any sources (including, but not limited to subsidy payments under any Housing Assistance Payments Contract), pay the total amount of such receipts to the Lender.  However, until the occurrence of an Event of Default, Lender hereby grants to Borrower a revocable license to collect and receive all Rents, to hold all Rents in trust for the benefit of Lender and to apply all Rents to pay the installments of interest and principal then due and payable under the Note and the other amounts then due and payable under the other Loan Documents, including Imposition Deposits, and to pay the current costs and expenses of managing, operating and maintaining the Mortgaged Property, including utilities, Taxes and insurance premiums (to the e xtent not included in Imposition Deposits), tenant improvements and other capital expenditures.  So long as no Event of Default has occurred and is continuing, the Rents remaining after application pursuant to the preceding sentence may be retained by Borrower free and clear of, and released from, Lender's rights with respect to Rents under this Instrument.  From and after the occurrence of an Event of Default, and without the necessity of Lender entering upon and taking and maintaining control of the Mortgaged Property directly, or by a receiver, Borrower’s license to collect Rents shall automatically terminate and Lender shall without notice be entitled to all Rents as they become due and payable, including Rents then due and unpaid.  Borrower shall pay to Lender upon demand all Rents to which Lender is entitled.  At any time on or after the date of Lender’s demand for Rents, Lender may give, and Borrower hereby irrevocably authorizes Lender to give, notice to all tenants of t he Mortgaged Property instructing them to pay all Rents to Lender, no tenant shall be obligated to inquire further as to the occurrence or continuance of an Event of Default, and no tenant shall be obligated to pay to Borrower any amounts which are actually paid to Lender in response to such a notice.  Any such notice by Lender shall be delivered to each tenant personally, by mail or by delivering such demand to each rental unit.  Borrower shall not interfere with and shall cooperate with Lender's collection of such Rents.

(c)

(c) Borrower represents and warrants to Lender that Borrower has not executed any prior assignment of Rents (other than an assignment of Rents securing indebtedness that will be paid off and discharged with the proceeds of the loan evidenced by the Note), that Borrower has not performed, and Borrower covenants and agrees that it will not perform, any acts and has not executed, and shall not execute, any instrument which would prevent Lender from exercising its rights under this Section 3, and that at the time of execution of this Instrument there has been no anticipation or prepayment of any Rents for more than two months prior to the due dates of such Rents.  Borrower shall not collect or accept payment of any Rents more than two months prior to the due dates of such Rents.

(d)

(d) If an Event of Default has occurred and is continuing, Lender may, regardless of the adequacy of Lender's security or the solvency of Borrower and even in the absence of waste, enter upon and take and maintain full control of the Mortgaged Property in order to perform all acts that Lender in its discretion determines to be necessary or desirable for the operation and maintenance of the Mortgaged Property, including the execution, cancellation or modification of Leases, the collection of all Rents, the making of repairs to the Mortgaged Property and the execution or termination of contracts providing for the management, operation or maintenance of the Mortgaged Property, for the purposes of enforcing the assignment of Rents pursuant to Section 3(a), protecting the Mortgaged Property or the security of this Instrument, or for such other purposes as Lender in its discretion may deem necessary or desirable.  Alternatively, if an Event of Default has occurred and is continuing, regardless of the adequacy of Lender's security, without regard to Borrower’s solvency and without the necessity of giving prior notice (oral or written) to Borrower, Lender may apply to any court having jurisdiction for the appointment of a receiver for the Mortgaged Property to take any or all of the actions set forth in the preceding sentence.  If Lender elects to seek the appointment of a receiver for the Mortgaged Property at any time after an Event of Default has occurred and is continuing, Borrower, by its execution of this Instrument, expressly consents to the appointment of such receiver, including the appointment of a receiver ex parte if permitted by applicable law.  Lender or the receiver, as the case may be, shall be entitled to receive a reasonable fee for managing the Mortgaged Property.  Immediately upon appointment of a receiver or immediately upon the Lender's entering upon and taking possession and control of the Mortgaged Property, Borrower shall surrender possession of the Mortgaged Pro perty to Lender or the receiver, as the case may be, and shall deliver to Lender or the receiver, as the case may be, all documents, records (including records on electronic or magnetic media), accounts, surveys, plans, and specifications relating to the Mortgaged Property and all security deposits and prepaid Rents.  In the event Lender takes possession and control of the Mortgaged Property, Lender may exclude Borrower and its representatives from the Mortgaged Property.  Borrower acknowledges and agrees that the exercise by Lender of any of the rights conferred under this Section 3 shall not be construed to make Lender a mortgagee-in-possession of the Mortgaged Property so long as Lender has not itself entered into actual possession of the Land and Improvements.

(e)

(e) If Lender enters the Mortgaged Property, Lender shall be liable to account only to Borrower and only for those Rents actually received.  Lender shall not be liable to Borrower, anyone claiming under or through Borrower or anyone having an interest in the Mortgaged Property, by reason of any act or omission of Lender under this Section 3, and Borrower hereby releases and discharges Lender from any such liability to the fullest extent permitted by law.

(f)

(f) If the Rents are not sufficient to meet the costs of taking control of and managing the Mortgaged Property and collecting the Rents, any funds expended by Lender for such purposes shall become an additional part of the Indebtedness as provided in Section 12.

(g)

(g) Any entering upon and taking of control of the Mortgaged Property by Lender or the receiver, as the case may be, and any application of Rents as provided in this Instrument shall not cure or waive any Event of Default or invalidate any other right or remedy of Lender under applicable law or provided for in this Instrument.

4.

4. ASSIGNMENT OF LEASES; LEASES AFFECTING THE MORTGAGED PROPERTY.

(a)

(a) As part of the consideration for the Indebtedness, Borrower absolutely and unconditionally assigns and transfers to Lender all of Borrower's right, title and interest in, to and under the Leases, including Borrower's right, power and authority to modify the terms of any such Lease, or extend or terminate any such Lease.   It is the intention of Borrower to establish a present, absolute and irrevocable transfer and assignment to Lender of all of Borrower’s right, title and interest in, to and under the Leases.  Borrower and Lender intend this assignment of the Leases to be immediately effective and to constitute an absolute present assignment and not an assignment for additional security only.  For purposes of giving effect to this absolute assignment of the Leases, and for no other purpose, the Leases shall not be deemed to be a part of the “Mortgaged Property,” as that term is defined in Section 1(s).  However, if this present, absolute and unconditional assignment of the Leases is not enforceable by its terms under the laws of the Property Jurisdiction, then the Leases shall be included as a part of the Mortgaged Property and it is the intention of the Borrower that in this circumstance this Instrument create and perfect a lien on the Leases in favor of Lender, which lien shall be effective as of the date of this Instrument.

(b)

(b) Until Lender gives notice to Borrower of Lender's exercise of its rights under this Section 4, Borrower shall have all rights, power and authority granted to Borrower under any Lease (except as otherwise limited by this Section or any other provision of this Instrument), including the right, power and authority to modify the terms of any Lease or extend or terminate any Lease.  Upon the occurrence of an Event of Default, the permission given to Borrower pursuant to the preceding sentence to exercise all rights, power and authority under Leases shall automatically terminate.  Borrower shall comply with and observe Borrower's obligations under all Leases, including Borrower's obligations pertaining to the maintenance and disposition of tenant security deposits.

(c)

(c) Borrower acknowledges and agrees that the exercise by Lender, either directly or by a receiver, of any of the rights conferred under this Section 4 shall not be construed to make Lender a mortgagee-in-possession of the Mortgaged Property so long as Lender has not itself entered into actual possession of the Land and the Improvements.  The acceptance by Lender of the assignment of the Leases pursuant to Section 4(a) shall not at any time or in any event obligate Lender to take any action under this Instrument or to expend any money or to incur any expenses.  Lender shall not be liable in any way for any injury or damage to person or property sustained by any person or persons, firm or corporation in or about the Mortgaged Property.  Prior to Lender's actual entry into and taking possession of the Mortgaged Property, Lender shall not (i) be obligated to perform any of the terms, covenants and conditions contained in any Lease (or otherwise have any obligation with respect to any Le ase); (ii) be obligated to appear in or defend any action or proceeding relating to the Lease or the Mortgaged Property; or (iii) be responsible for the operation, control, care, management or repair of the Mortgaged Property or any portion of the Mortgaged Property.  The execution of this Instrument by Borrower shall constitute conclusive evidence that all responsibility for the operation, control, care, management and repair of the Mortgaged Property is and shall be that of Borrower, prior to such actual entry and taking of possession.

(d)

(d) Upon delivery of notice by Lender to Borrower of Lender's exercise of Lender's rights under this Section 4 at any time after the occurrence of an Event of Default, and without the necessity of Lender entering upon and taking and maintaining control of the Mortgaged Property directly, by a receiver, or by any other manner or proceeding permitted by the laws of the Property Jurisdiction, Lender immediately shall have all rights, powers and authority granted to Borrower under any Lease, including the right, power and authority to modify the terms of any such Lease, or extend or terminate any such Lease.

(e)

(e) Borrower shall, promptly upon Lender's request, deliver to Lender an executed copy of each residential Lease then in effect. All Leases for residential dwelling units shall be on forms approved by Lender, shall be for initial terms of at least six months and not more than two years, and shall not include options to purchase.  If customary in the applicable market, residential Leases with terms of less than six months may be permitted with Lender's prior written consent.

(f)

(f) Borrower shall not lease any portion of the Mortgaged Property for non-residential use except with the prior written consent of Lender and Lender's prior written approval of the Lease agreement.  Borrower shall not modify the terms of, or extend or terminate, any Lease for non-residential use (including any Lease in existence on the date of this Instrument) without the prior written consent of Lender.  Borrower shall, without request by Lender, deliver an executed copy of each non-residential Lease to Lender promptly after such Lease is signed.  All non-residential Leases, including renewals or extensions of existing Leases, shall specifically provide that (1) such Leases are subordinate to the lien of this Instrument (unless waived in writing by Lender); (2) the tenant shall attorn to Lender and any purchaser at a foreclosure sale, such attornment to be self-executing and effective upon acquisition of title to the Mortgaged Property by any purchaser at a foreclosure sale or by Lender in a ny manner; (3) the tenant agrees to execute such further evidences of attornment as Lender or any purchaser at a foreclosure sale may from time to time request; (4) the Lease shall not be terminated by foreclosure or any other transfer of the Mortgaged Property; (5) after a foreclosure sale of the Mortgaged Property, Lender or any other purchaser at such foreclosure sale may, at Lender's or such purchaser's option, accept or terminate such Lease; and (6) the tenant shall, upon receipt after the occurrence of an Event of Default of a written request from Lender, pay all Rents payable under the Lease to Lender.

(g)

(g) Borrower shall not receive or accept Rent under any Lease (whether residential or non-residential) for more than two months in advance.

5.

5. PAYMENT OF INDEBTEDNESS; PERFORMANCE UNDER LOAN DOCUMENTS; PREPAYMENT PREMIUM.  Borrower shall pay the Indebtedness when due in accordance with the terms of the Note and the other Loan Documents and shall perform, observe and comply with all other provisions of the Note and the other Loan Documents.  Borrower shall pay a prepayment premium in connection with certain prepayments of the Indebtedness, including a payment made after Lender's exercise of any right of acceleration of the Indebtedness, as provided in the Note.

6.

6. EXCULPATION.  Borrower’s personal liability for payment of the Indebtedness and for performance of the other obligations to be performed by it under this Instrument is limited in the manner, and to the extent, provided in the Note.

7.

7. DEPOSITS FOR TAXES, INSURANCE AND OTHER CHARGES.

(a)

(a) Borrower shall deposit with Lender on the day monthly installments of principal or interest, or both, are due under the Note (or on another day designated in writing by Lender), until the Indebtedness is paid in full, an additional amount sufficient to accumulate with Lender the entire sum required to pay, when due (1) any water and sewer charges which, if not paid, may result in a lien on all or any part of the Mortgaged Property, (2) the premiums for fire and other hazard insurance, rent loss insurance and such other insurance as Lender may require under Section 19, (3) Taxes, and (4) amounts for other charges and expenses which Lender at any time reasonably deems necessary to protect the Mortgaged Property, to prevent the imposition of liens on the Mortgaged Property, or otherwise to protect Lender's interests, all as reasonably estimated from time to time by Lender.  The amounts deposited under the preceding sentence are collectively referred to in this Instrument as the "Imposition Deposits".  The obligations of Borrower for which the Imposition Deposits are required are collectively referred to in this Instrument as "Impositions".  The amount of the Imposition Deposits shall be sufficient to enable Lender to pay each Imposition before the last date upon which such payment may be made without any penalty or interest charge being added.  Lender shall maintain records indicating how much of the monthly Imposition Deposits and how much of the aggregate Imposition Deposits held by Lender are held for the purpose of paying Taxes, insurance premiums and each other obligation of Borrower for which Imposition Deposits are required.  Any waiver by Lender of the requirement that Borrower remit Imposition Deposits to Lender may be revoked by Lender, in Lender's discretion, at any time upon notice to Borrower.

(b)

(b) Imposition Deposits shall be held in an institution (which may be Lender, if Lender is such an institution) whose deposits or accounts are insured or guaranteed by a federal agency.  Lender shall not be obligated to open additional accounts or deposit Imposition Deposits in additional institutions when the amount of the Imposition Deposits exceeds the maximum amount of the federal deposit insurance or guaranty.  Lender shall apply the Imposition Deposits to pay Impositions so long as no Event of Default has occurred and is continuing.  Unless applicable law requires, Lender shall not be required to pay Borrower any interest, earnings or profits on the Imposition Deposits.  Borrower hereby pledges and grants to Lender a security interest in the Imposition Deposits as additional security for all of Borrower's obligations under this Instrument and the other Loan Documents.  Any amounts deposited with Lender under this Section 7 shall not be trust funds, nor shall they operate t o reduce the Indebtedness, unless applied by Lender for that purpose under Section 7(e).

(c)

(c) If Lender receives a bill or invoice for an Imposition, Lender shall pay the Imposition from the Imposition Deposits held by Lender.  Lender shall have no obligation to pay any Imposition to the extent it exceeds Imposition Deposits then held by Lender.  Lender may pay an Imposition according to any bill, statement or estimate from the appropriate public office or insurance company without inquiring into the accuracy of the bill, statement or estimate or into the validity of the Imposition.

(d)

(d) If at any time the amount of the Imposition Deposits held by Lender for payment of a specific Imposition exceeds the amount reasonably deemed necessary by Lender, the excess shall be credited against future installments of Imposition Deposits.  If at any time the amount of the Imposition Deposits held by Lender for payment of a specific Imposition is less than the amount reasonably estimated by Lender to be necessary, Borrower shall pay to Lender the amount of the deficiency within 15 days after notice from Lender.

(e)

(e) If an Event of Default has occurred and is continuing, Lender may apply any Imposition Deposits, in any amounts and in any order as Lender determines, in Lender's discretion, to pay any Impositions or as a credit against the Indebtedness. Upon payment in full of the Indebtedness, Lender shall refund to Borrower any Imposition Deposits held by Lender.

8.

8. COLLATERAL AGREEMENTS.  Borrower shall deposit with Lender such amounts as may be required by any Collateral Agreement and shall perform all other obligations of Borrower under each Collateral Agreement.

9.

9. APPLICATION OF PAYMENTS.  If at any time Lender receives, from Borrower or otherwise, any amount applicable to the Indebtedness which is less than all amounts due and payable at such time, then Lender may apply that payment to amounts then due and payable in any manner and in any order determined by Lender, in Lender's discretion.  Neither Lender's acceptance of an amount which is less than all amounts then due and payable nor Lender's application of such payment in the manner authorized shall constitute or be deemed to constitute either a waiver of the unpaid amounts or an accord and satisfaction.  Notwithstanding the application of any such amount to the Indebtedness,  Borrower’s obligations under this Instrument and the Note shall remain unchanged.

10.

10. COMPLIANCE WITH LAWS.  Borrower shall comply with all laws, ordinances, regulations and requirements of any Governmental Authority and all recorded lawful covenants and agreements relating to or affecting the Mortgaged Property, including all laws, ordinances, regulations, requirements and covenants pertaining to health and safety, construction of improvements on the Mortgaged Property, fair housing, zoning and land use, and Leases.  Borrower also shall comply with all applicable laws that pertain to the maintenance and disposition of tenant security deposits.  Borrower shall at all times maintain records sufficient to demonstrate  compliance with the provisions of this Section 10.  Borrower shall take appropriate measures to prevent, and shall not engage in or knowingly permit, any illegal activities at the Mortgaged Property that could endanger tenants or visitors, result in damage to the Mortgaged Property, result in forfeiture of the Mortgaged Property, or otherwise materially impair the lien created by this Instrument or Lender's interest in the Mortgaged Property.  Bor rower represents and warrants to Lender that no portion of the Mortgaged Property has been or will be purchased with the proceeds of any illegal activity.

11.

11. USE OF PROPERTY.  Unless required by applicable law, Borrower shall not (a) except for any change in use approved by Lender, allow changes in the use for which all or any part of the Mortgaged Property is being used at the time this Instrument was executed, (b) convert any individual dwelling units or common areas to commercial use, (c) initiate or acquiesce in a change in the zoning classification of the Mortgaged Property, or (d) establish any condominium or cooperative regime with respect to the Mortgaged Property.

12.

12. PROTECTION OF LENDER'S SECURITY.

(a)

(a) If Borrower fails to perform any of its obligations under this Instrument or any other Loan Document, or if any action or proceeding is commenced which purports to affect the Mortgaged Property, Lender's security or Lender's rights under this Instrument, including eminent domain, insolvency, code enforcement, civil or criminal forfeiture, enforcement of Hazardous Materials Laws, fraudulent conveyance or reorganizations or proceedings involving a bankrupt or decedent, then Lender at Lender's option may make such appearances, disburse such sums and take such actions as Lender reasonably deems necessary to perform such obligations of Borrower and to protect Lender's interest, including (1) payment of fees and out-of-pocket expenses of attorneys, accountants, inspectors and consultants, (2) entry upon the Mortgaged Property to make repairs or secure the Mortgaged Property, (3) procurement of the insurance required by Section 19, and (4) payment of amounts which Borrower has failed to pay under Sections& nbsp;15 and 17.

(b)

(b) Any amounts disbursed by Lender under this Section 12, or under any other provision of this Instrument that treats such disbursement as being made under this Section 12, shall be added to, and become part of, the principal component of the Indebtedness, shall be immediately due and payable and shall bear interest from the date of disbursement until paid at the "Default Rate", as defined in the Note.

(c)

(c) Nothing in this Section 12 shall require Lender to incur any expense or take any action.

13.

13. INSPECTION.  Lender, its agents, representatives, and designees may make or cause to be made entries upon and inspections of the Mortgaged Property (including environmental inspections and tests) during normal business hours, or at any other reasonable time.

14.

14. BOOKS AND RECORDS; FINANCIAL REPORTING.

(a)

(a) Borrower shall keep and maintain at all times at the Mortgaged Property or the management agent's offices, and upon Lender's request shall make available at the Mortgaged Property, complete and accurate books of account and records (including copies of supporting bills and invoices) adequate to reflect correctly the operation of the Mortgaged Property, and copies of all written contracts, Leases, and other instruments which affect the Mortgaged Property.  The books, records, contracts, Leases and other instruments shall be subject to examination and inspection at any reasonable time by Lender.

(b)

(b) Borrower shall furnish to Lender all of the following:

(1)

within 120 days after the end of each fiscal year of Borrower, a statement of income and expenses for Borrower's operation of the Mortgaged Property for that fiscal year, a statement of changes in financial position of Borrower relating to the Mortgaged Property for that fiscal year and, when requested by Lender, a balance sheet showing all assets and liabilities of Borrower relating to the Mortgaged Property as of the end of that fiscal year;

(2)

within 120 days after the end of each fiscal year of Borrower, and at any other time upon Lender's request, a rent schedule for the Mortgaged Property showing the name of each tenant, and for each tenant, the space occupied, the lease expiration date, the rent payable for the current month, the date through which rent has been paid, and any related information requested by Lender;

(3)

within 120 days after the end of each fiscal year of Borrower, and at any other time upon Lender's request, an accounting of all security deposits held pursuant to all Leases, including the name of the institution (if any) and the names and identification numbers of the accounts (if any) in which such security deposits are held and the name of the person to contact at such financial institution, along with any authority or release necessary for Lender to access information regarding such accounts;

(4)

within 120 days after the end of each fiscal year of Borrower, and at any other time upon Lender's request, a statement that identifies all owners of any interest in Borrower and the interest held by each, if Borrower is a corporation, all officers and directors of Borrower, and if Borrower is a limited liability company, all managers who are not members;

(5)

upon Lender's request, a monthly property management report for the Mortgaged Property, showing the number of inquiries made and rental applications received from tenants or prospective tenants and deposits received from tenants and any other information requested by Lender;

(6)

upon Lender's request, a balance sheet, a statement of income and expenses for Borrower and a statement of changes in financial position of Borrower for Borrower's most recent fiscal year; and

(7)

if required by Lender, a statement of income and expense for the Mortgaged Property for the prior month or quarter.

(c)

(c) Each of the statements, schedules and reports required by Section 14(b) shall be certified to be complete and accurate by an individual having authority to bind Borrower, and shall be in such form and contain such detail as Lender may reasonably require.  Lender also may require that any statements, schedules or reports be audited at Borrower's expense by independent certified public accountants acceptable to Lender.

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -

Form 4015

11/01

Page 12

INDIANA

Ó 1997-2001 Fannie Mae

(d)

(d) If Borrower fails to provide in a timely manner the statements, schedules and reports required by Section 14(b), Lender shall have the right to have Borrower's books and records audited, at Borrower’s expense, by independent certified public accountants selected by Lender in order to obtain such statements, schedules and reports, and all related costs and expenses of Lender shall become immediately due and payable and shall become an additional part of the Indebtedness as provided in Section 12.

(e)

(e) If an Event of Default has occurred and is continuing, Borrower shall deliver to Lender upon written demand all books and records relating to the Mortgaged Property or its operation.

(f)

(f) Borrower authorizes Lender to obtain a credit report on Borrower at any time.

(g)

(g) If an Event of Default has occurred and Lender has not previously required Borrower to furnish a quarterly statement of income and expense for the Mortgaged Property, Lender may require Borrower to furnish such a statement within 45 days after the end of each fiscal quarter of Borrower following such Event of Default.

15.

15. TAXES; OPERATING EXPENSES.

(a)

(a) Subject to the provisions of Section 15(c) and Section 15(d), Borrower shall pay, or cause to be paid, all Taxes when due and before the addition of any interest, fine, penalty  or cost for nonpayment.  

(b)

(b) Subject to the provisions of Section 15(c), Borrower shall pay the expenses of operating, managing, maintaining and repairing the Mortgaged Property (including insurance premiums, utilities, repairs and replacements) before the last date upon which each such payment may be made without any penalty or interest charge being added.

(c)

(c) As long as no Event of Default exists and Borrower has timely delivered to Lender any bills or premium notices that it has received, Borrower shall not be obligated to pay Taxes, insurance premiums or any other individual Imposition to the extent that sufficient Imposition Deposits are held by Lender for the purpose of paying that specific Imposition.  If an Event of Default exists, Lender may exercise any rights Lender may have with respect to Imposition Deposits without regard to whether Impositions are then due and payable.  Lender shall have no liability to Borrower for failing to pay any Impositions to the extent that any Event of Default has occurred and is continuing, insufficient Imposition Deposits are held by Lender at the time an Imposition becomes due and payable or Borrower has failed to provide Lender with bills and premium notices as provided above.

(d)

(d) Borrower, at its own expense, may contest by appropriate legal proceedings, conducted diligently and in good faith, the amount or validity of any Imposition other than insurance premiums, if (1) Borrower notifies Lender of the commencement or expected commencement of such proceedings, (2) the Mortgaged Property is not in danger of being sold or forfeited, (3) Borrower deposits with Lender reserves sufficient to pay the contested Imposition, if requested by Lender, and (4) Borrower furnishes whatever additional security is required in the proceedings or is reasonably requested by Lender, which may include the delivery to Lender of the reserves established by Borrower to pay the contested Imposition.

(e)

(e) Borrower shall promptly deliver to Lender a copy of all notices of, and invoices for, Impositions, and if Borrower pays any Imposition directly, Borrower shall promptly furnish to Lender receipts evidencing such payments.

16.

16. LIENS; ENCUMBRANCES.  Borrower acknowledges that, to the extent provided in Section 21, the grant, creation or existence of any mortgage, deed of trust, deed to secure debt, security interest or other lien or encumbrance (a "Lien") on the Mortgaged Property (other than the lien of this Instrument) or on certain ownership interests in Borrower, whether voluntary, involuntary or by operation of law, and whether or not such Lien has priority over the lien of this Instrument, is a "Transfer" which constitutes an Event of Default.

17.

17. PRESERVATION, MANAGEMENT AND MAINTENANCE OF MORTGAGED PROPERTY.  

(a)

(a) Borrower (1) shall not commit waste or permit impairment or deterioration of the Mortgaged Property, (2) shall not abandon the Mortgaged Property, (3) shall restore or repair promptly, in a good and workmanlike manner, any damaged part of the Mortgaged Property to the equivalent of its original condition, or such other condition as Lender may approve in writing, whether or not insurance proceeds or condemnation awards are available to cover any costs of such restoration or repair, (4) shall keep the Mortgaged Property in good repair, including the replacement of Personalty and Fixtures with items of equal or better function and quality, (5) shall provide for professional management of the Mortgaged Property by a residential rental property manager satisfactory to Lender under a contract approved by Lender in writing, and (6) shall give notice to Lender of and, unless otherwise directed in writing by Lender, shall appear in and defend any action or proceeding purporting to affect the Mortgaged Property, L ender's security or Lender's rights under this Instrument.  Borrower shall not (and shall not permit any tenant or other person to) remove, demolish or alter the Mortgaged Property or any part of the Mortgaged Property except in connection with the replacement of tangible Personalty.

(b)

(b) If, in connection with the making of the loan evidenced by the Note or at any later date, Lender waives in writing the requirement of Section 17(a)(5) above that Borrower enter into a written contract for management of the Mortgaged Property and if, after the date of this Instrument, Borrower intends to change the management of the Mortgaged Property, Lender shall have the right to approve such new property manager and the written contract for the management of the Mortgaged Property and require that Borrower and such new property manager enter into an Assignment of Management Agreement on a form approved by Lender.  If required by Lender (whether before or after an Event of Default), Borrower will cause any Affiliate of Borrower to whom fees are payable for the management of the Mortgaged Property to enter into an agreement with Lender, in a form approved by Lender, providing for subordination of those fees and such other provisions as Lender may require.  "Affiliate of Borrower" mea ns any corporation, partnership, joint venture, limited liability company, limited liability partnership, trust or individual controlled by, under common control with, or which controls Borrower (the term "control" for these purposes shall mean the ability, whether by the ownership of shares or other equity interests, by contract or otherwise, to elect a majority of the directors of a corporation, to make management decisions on behalf of, or independently to select the managing partner of, a partnership, or otherwise to have the power independently to remove and then select a majority of those individuals exercising managerial authority over an entity, and control shall be conclusively presumed in the case of the ownership of 50% or more of the equity interests).

18.

18. ENVIRONMENTAL HAZARDS.

(a)

(a) Except for matters covered by a written program of operations and maintenance approved in writing by Lender (an "O&M Program") or matters described in Section 18(b), Borrower shall not cause or permit any of the following:

(1)

the presence, use, generation, release, treatment, processing, storage (including storage in above ground and underground storage tanks),

handling, or disposal of any Hazardous Materials on or under the Mortgaged Property or any other  property of Borrower that is adjacent to the Mortgaged Property;

(2)

the transportation of any Hazardous Materials to, from, or across the Mortgaged Property;

(3)

any occurrence or condition on the Mortgaged Property or any other property of Borrower that is adjacent to the Mortgaged Property, which occurrence or condition is or may be in violation of Hazardous Materials Laws; or

(4)

any violation of or noncompliance with the terms of any Environmental Permit with respect to the Mortgaged Property or any  property of Borrower that is adjacent to the Mortgaged Property.

The matters described in clauses (1) through (4) above are referred to collectively in this Section 18 as "Prohibited Activities or Conditions".

(b)

(b) Prohibited Activities and Conditions shall not include the safe and lawful use and storage of quantities of (1) pre-packaged supplies, cleaning materials and petroleum products customarily used in the operation and maintenance of comparable multifamily properties, (2) cleaning materials, personal grooming items and other items sold in pre-packaged containers for consumer use and used by tenants and occupants of residential dwelling units in the Mortgaged Property; and (3) petroleum products used in the operation and maintenance of motor vehicles from time to time located on the Mortgaged Property’s parking areas, so long as all of the foregoing are used, stored, handled, transported and disposed of in compliance with Hazardous Materials Laws.

(c)

(c) Borrower shall take all commercially reasonable actions (including the inclusion of appropriate provisions in any Leases executed after the date of this Instrument) to prevent its employees, agents, and contractors, and all tenants and other occupants from causing or permitting any Prohibited Activities or Conditions.  Borrower shall not lease or allow the sublease or use of all or any portion of the Mortgaged Property to any tenant or subtenant for nonresidential use by any user that, in the ordinary course of its business, would cause or permit any Prohibited Activity or Condition.

(d)

(d) If an O&M Program has been established with respect to Hazardous Materials, Borrower shall comply in a timely manner with, and cause all employees, agents, and contractors of Borrower and any other persons present on the Mortgaged Property to comply with the O&M Program.  All costs of performance of Borrower's obligations under any O&M Program shall be paid by Borrower, and Lender's out-of-pocket costs incurred in connection with the monitoring and review of the O&M Program and Borrower's performance shall be paid by Borrower upon demand by Lender.  Any such out-of-pocket costs of Lender which Borrower fails to pay promptly shall become an additional part of the Indebtedness as provided in Section 12.

(e)

(e) Borrower represents and warrants to Lender that, except as previously disclosed by Borrower to Lender in writing:

(1)

Borrower has not at any time engaged in, caused or permitted any Prohibited Activities or Conditions;

(2)

to the best of Borrower's knowledge after reasonable and diligent inquiry, no Prohibited Activities or Conditions exist or have existed;

(3)

except to the extent previously disclosed by Borrower to Lender in writing, the Mortgaged Property does not now contain any underground storage tanks, and, to the best of Borrower’s knowledge after reasonable and diligent inquiry, the Mortgaged Property has not contained any underground storage tanks in the past.  If there is an underground storage tank located on the Property which has been previously disclosed by Borrower to Lender in writing, that tank complies with all requirements of Hazardous Materials Laws;

(4)

Borrower has complied with all Hazardous Materials Laws, including all requirements for notification regarding releases of Hazardous Materials.  Without limiting the generality of the foregoing, Borrower has obtained all Environmental Permits required for the operation of the Mortgaged Property in accordance with Hazardous Materials Laws now in effect and all such Environmental Permits are in full force and effect;  

(5)

no event has occurred with respect to the Mortgaged Property that constitutes, or with the passing of time or the giving of notice would constitute, noncompliance with the terms of any Environmental Permit;

(6)

there are no actions, suits, claims or proceedings pending or, to the best of Borrower’s knowledge after reasonable and diligent inquiry, threatened  that involve the Mortgaged Property and allege, arise out of, or relate to any Prohibited Activity or Condition; and

(7)

Borrower has not received any complaint, order, notice of violation or other communication from any Governmental Authority with regard to air emissions, water discharges, noise emissions or Hazardous Materials, or any other environmental, health or safety matters affecting the Mortgaged Property or any other property of Borrower that is adjacent to the Mortgaged Property.

The representations and warranties in this Section 18 shall be continuing representations and warranties that shall be deemed to be made by Borrower throughout the term of the loan evidenced by the Note, until the Indebtedness has been paid in full.

(f)

(f) Borrower shall promptly notify Lender in writing upon the occurrence of any of  the following events:

(1)

Borrower's discovery of any Prohibited Activity or Condition;

(2)

Borrower’s receipt of or knowledge of any complaint, order, notice of violation or other communication from any Governmental Authority or other person with regard to present or future alleged Prohibited Activities or Conditions or any other environmental, health or safety matters affecting the Mortgaged Property or any other property of Borrower that is adjacent to the Mortgaged Property; and  

(3)

any representation or warranty in this Section 18 becomes untrue after the date of this Agreement.

Any such notice given by Borrower shall not relieve Borrower of, or result in a waiver of, any obligation under this Instrument, the Note, or any other Loan Document.

(g)

(g) Borrower shall pay promptly the costs of any environmental inspections, tests or audits ("Environmental Inspections") required by Lender in connection with any foreclosure or deed in lieu of foreclosure, or as a condition of Lender’s consent to any Transfer under Section 21, or required by Lender following a reasonable determination by Lender that Prohibited Activities or Conditions may exist.  Any such costs incurred by Lender (including the fees and out-of-pocket costs of attorneys and technical consultants whether incurred in connection with any judicial or administrative process or otherwise) which Borrower fails to pay promptly shall become an additional part of the Indebtedness as provided in Section 12.  The results of all Environmental Inspections made by Lender shall at all times remain the property of Lender and Lender shall have no obligation to disclose or otherwise make available to Borrower or any other party such results or any other information ob tained by Lender in connection with its Environmental Inspections.  Lender hereby reserves the right, and Borrower hereby expressly authorizes Lender, to make available to any party, including any prospective bidder at a foreclosure sale of the Mortgaged Property, the results of any Environmental Inspections made by Lender with respect to the Mortgaged Property.  Borrower consents to Lender notifying any party (either as part of a notice of sale or otherwise) of the results of any of Lender's Environmental Inspections.  Borrower acknowledges that Lender cannot control or otherwise assure the truthfulness or accuracy of the results of any of its Environmental Inspections and that the release of such results to prospective bidders at a foreclosure sale of the Mortgaged Property may have a material and adverse effect upon the amount which a party may bid at such sale.  Borrower agrees that Lender shall have no liability whatsoever as a result of delivering the results of any of its Environme ntal Inspections to any third party, and Borrower hereby releases and forever discharges Lender from any and all claims, damages, or causes of action, arising out of, connected with or incidental to the results of, the delivery of any of Lender's Environmental Inspections.

(h)

(h) If any investigation, site monitoring, containment, clean-up, restoration or other remedial work ("Remedial Work") is necessary to comply with any Hazardous Materials Law or order of any Governmental Authority that has or acquires jurisdiction over the Mortgaged Property  or the use, operation or improvement of the Mortgaged Property under any Hazardous Materials Law, Borrower shall, by the earlier of (1) the applicable deadline required by Hazardous Materials Law or (2) 30 days after notice from Lender demanding such action, begin performing the Remedial Work, and thereafter diligently prosecute it to completion, and shall in any event complete the work by the time required by applicable Hazardous Materials Law.  If Borrower fails to begin on a timely basis or diligently prosecute any required Remedial Work, Lender may, at its option, cause the Remedial Work to be completed, in which case Borrower shall reimburse Lender on demand for the cost of doing so.  Any reimburseme nt due from Borrower to Lender shall become part of the Indebtedness as provided in Section 12.

(i)

(i) Borrower shall cooperate with any inquiry by any Governmental Authority and shall comply with any governmental or judicial order which arises from any alleged Prohibited Activity or Condition.

(j)

(j) Borrower shall indemnify, hold harmless and defend (i) Lender, (ii) any prior owner or holder of the Note, (iii) the Loan Servicer, (iv) any prior Loan Servicer, (v) the officers, directors, shareholders, partners, employees and trustees of any of the foregoing, and (vi) the heirs, legal representatives, successors and assigns of each of the foregoing (collectively, the "Indemnitees") from and against all proceedings, claims, damages, penalties and costs (whether initiated or sought by Governmental Authorities or private parties), including fees and out-of-pocket expenses of attorneys and expert witnesses, investigatory fees, and remediation costs, whether incurred in connection with any judicial or administrative process or otherwise, arising directly or indirectly from any of the following:

(1)

any breach of any representation or warranty of Borrower in this Section 18;  

(2)

any failure by Borrower to perform any of its obligations under this Section 18;

(3)

the existence or alleged existence of any Prohibited Activity or Condition;

(4)

the presence or alleged presence of Hazardous Materials on or under the Mortgaged Property or any property of Borrower that is adjacent to the Mortgaged Property; and

(5)

the actual or alleged violation of any Hazardous Materials Law.  

(k)

(k) Counsel selected by Borrower to defend Indemnitees shall be subject to the  approval of those Indemnitees.  However, any Indemnitee may elect to defend any claim or legal or administrative proceeding at the Borrower’s expense.  

(l)

(l) Borrower shall not, without the prior written consent of those Indemnitees who are named as parties to a claim or legal or administrative proceeding (a "Claim"), settle or compromise the Claim if the settlement (1) results in the entry of any judgment that does not include as an unconditional term the delivery by the claimant or plaintiff to Lender of a written release of those Indemnitees, satisfactory in form and substance to Lender; or (2) may materially and adversely affect Lender, as determined by Lender in its discretion.

(m)

(m) Lender agrees that the indemnity under this Section 18 shall be limited to the assets of Borrower and Lender shall not seek to recover any deficiency from any natural persons who are general partners of Borrower.

(n)

(n) Borrower shall, at its own cost and expense, do all of the following:

(1)

pay or satisfy any judgment or decree that may be entered against any Indemnitee or Indemnitees in any legal or administrative proceeding incident to any matters against which Indemnitees are entitled to be indemnified under this Section 18;

(2)

reimburse Indemnitees for any expenses paid or incurred in connection with any matters against which Indemnitees are entitled to be indemnified under this Section 18; and

(3)

reimburse Indemnitees for any and all expenses, including fees and out-of-pocket expenses of attorneys and expert witnesses, paid or incurred in connection with the enforcement by Indemnitees of their rights under this Section 18, or in monitoring and participating in any legal or administrative proceeding.

(o)

(o) In any circumstances in which the indemnity under this Section 18 applies, Lender may employ its own legal counsel and consultants to prosecute, defend or negotiate any claim or legal or administrative proceeding and Lender, with the prior written consent of Borrower (which shall not be unreasonably withheld, delayed or conditioned), may settle or compromise any action or legal or administrative proceeding.  Borrower shall reimburse Lender upon demand for all costs and expenses incurred by Lender, including all costs of settlements entered into in good faith, and the fees and out-of-pocket expenses of such attorneys and consultants.

(p)

(p) The provisions of this Section 18 shall be in addition to any and all other obligations and liabilities that Borrower may have  under applicable law or under other Loan Documents, and each Indemnitee shall be entitled to indemnification under this Section 18 without regard to whether Lender or that Indemnitee has exercised any rights against the Mortgaged Property or any other security, pursued any rights against any guarantor, or pursued any other rights available under the Loan Documents or applicable law. If Borrower consists of more than one person or entity, the obligation of those persons or entities to indemnify the Indemnitees under this Section 18 shall be joint and several. The obligation of Borrower to indemnify the Indemnitees under this Section 18 shall survive any repayment or discharge of the Indebtedness, any foreclosure proceeding, any foreclosure sale, any delivery of any deed in lieu of foreclosure, and any release of record of the lien of this Instrument.

19.

19. PROPERTY AND LIABILITY INSURANCE.

(a)

(a) Borrower shall keep the Improvements insured at all times against such hazards as Lender may from time to time require, which insurance shall include but not be limited to coverage against loss by fire and allied perils, general boiler and machinery coverage, and business income coverage.  Lender’s insurance requirements may change from time to time throughout the term of the Indebtedness.  If Lender so requires, such insurance shall also include sinkhole insurance, mine subsidence insurance, earthquake insurance, and, if the Mortgaged Property does not conform to applicable zoning or land use laws, building ordinance or law coverage.  If any of the Improvements is located in an area identified by the Federal Emergency Management Agency (or any successor to that agency) as an area having special flood hazards, and if flood insurance is available in that area, Borrower shall insure such Improvements against loss by flood.

(b)

(b) All premiums on insurance policies required under Section 19(a) shall be paid in the manner provided in Section 7, unless Lender has designated in writing another method of payment.  All such policies shall also be in a form approved by Lender.  All policies of property damage insurance shall include a non-contributing, non-reporting mortgage clause in favor of, and in a form approved by, Lender.  Lender shall have the right to hold the original policies or duplicate original policies of all insurance required by Section 19(a).  Borrower shall promptly deliver to Lender a copy of all renewal and other notices received by Borrower with respect to the policies and all receipts for paid premiums.  At least 30 days prior to the expiration date of a policy, Borrower shall deliver to Lender the original  (or a duplicate original) of a renewal policy in form satisfactory to Lender.

(c)

(c) Borrower shall maintain at all times commercial general liability insurance, workers’ compensation insurance and such other liability, errors and omissions and fidelity insurance coverages as Lender may from time to time require.

(d)

(d) All insurance policies and renewals of insurance policies required by this Section 19 shall be in such amounts and for such periods as Lender may from time to time require, and shall be issued by insurance companies satisfactory to Lender.

(e)

(e) Borrower shall comply with all insurance requirements and shall not permit any condition to exist on the Mortgaged Property that would invalidate any part of any insurance coverage that this Instrument requires Borrower to maintain.

(f)

(f) In the event of loss, Borrower shall give immediate written notice to the insurance carrier and to Lender.  Borrower hereby authorizes and appoints Lender as attorney-in-fact for Borrower to make proof of loss, to adjust and compromise any claims under policies of property damage insurance, to appear in and prosecute any action arising from such property damage insurance policies, to collect and receive the proceeds of property damage insurance, and to deduct from such proceeds Lender’s expenses incurred in the collection of such proceeds.  This power of attorney is coupled with an interest and therefore is irrevocable.  However, nothing contained in this Section 19 shall require Lender to incur any expense or take any action.  Lender may, at Lender’s option, (1) hold the balance of such proceeds to be used to reimburse Borrower for the cost of restoring and repairing the Mortgaged Property to the equivalent of its original condition or to a condition approved by Lender (the "Restoration"), or (2) apply the balance of such proceeds to the payment of the Indebtedness, whether or not then due. To the extent Lender determines to apply insurance proceeds to Restoration, Lender shall do so in accordance with Lender’s then-current policies relating to the restoration of casualty damage on similar multifamily properties.

(g)

(g) Lender shall not exercise its option to apply insurance proceeds to the payment of the Indebtedness if all of the following conditions are met:  (1) no Event of Default (or any event which, with the giving of notice or the passage of time, or both, would constitute an Event of Default) has occurred and is continuing; (2) Lender determines, in its discretion, that there will be sufficient funds to complete the Restoration; (3) Lender determines, in its discretion, that the rental income from the Mortgaged Property after completion of the Restoration will be sufficient to meet all operating costs and other expenses, Imposition Deposits, deposits to reserves and loan repayment obligations relating to the Mortgaged Property; (4) Lender determines, in its discretion, that the Restoration will be completed before the earlier of (A) one year before the maturity date of the Note or (B) one year after the date of the loss or casualty; and (5) upon Lender's request, Borrower provides Lender evidence of the av ailability during and after the Restoration of the insurance required to be maintained by Borrower pursuant to this Section 19.

(h)

(h) If the Mortgaged Property is sold at a foreclosure sale or Lender acquires title to the Mortgaged Property, Lender shall automatically succeed to all rights of Borrower in and to any insurance policies and unearned insurance premiums and in and to the proceeds resulting from any damage to the Mortgaged Property prior to such sale or acquisition.

20.

20. CONDEMNATION.

(a)

(a) Borrower shall promptly notify Lender of any action or proceeding relating to any condemnation or other taking, or conveyance in lieu thereof, of all or any part of the Mortgaged Property, whether direct or indirect (a "Condemnation").  Borrower shall appear in and prosecute or defend any action or proceeding relating to any Condemnation unless otherwise directed by Lender in writing.  Borrower authorizes and appoints Lender as attorney-in-fact for Borrower to commence, appear in and prosecute, in Lender’s or Borrower’s name, any action or proceeding relating to any Condemnation and to settle or compromise any claim in connection with any Condemnation.  This power of attorney is coupled with an interest and therefore is irrevocable.  However, nothing contained in this Section 20 shall require Lender to incur any expense or take any action.  Borrower hereby transfers and assigns to Lender all right, title and interest of Borrower in and to any award or payment with respect to (i) any Condemnation, or any conveyance in lieu of Condemnation, and (ii) any damage to the Mortgaged Property caused by governmental action that does not result in a Condemnation.

(b)

(b) Lender may apply such awards or proceeds, after the deduction of Lender’s expenses incurred in the collection of such amounts, at Lender’s option, to the restoration or repair of the Mortgaged Property or to the payment of the Indebtedness, with the balance, if any, to Borrower.  Unless Lender otherwise agrees in writing, any application of any awards or proceeds to the Indebtedness shall not extend or postpone the due date of any monthly installments referred to in the Note, Section 7 of this Instrument or any Collateral Agreement, or change the amount of such installments.  Borrower agrees to execute such further evidence of assignment of any awards or proceeds as Lender may require.

21.

21. TRANSFERS OF THE MORTGAGED PROPERTY OR INTERESTS IN BORROWER.

(a)

(a) The occurrence of any of the following events shall constitute an Event of Default under this Instrument:

(1)

a Transfer of all or any part of the Mortgaged Property or any interest in the Mortgaged Property;

(2)

a Transfer of a Controlling Interest in Borrower;

(3)

a Transfer of a Controlling Interest in any entity which owns, directly or indirectly through one or more intermediate entities, a Controlling Interest in Borrower;

(4)

a Transfer of all or any part of Key Principal's ownership interests (other than limited partnership interests) in Borrower, or in any other entity which owns, directly or indirectly through one or more intermediate entities, an ownership interest in Borrower;

(5)

if Key Principal is an entity, (A) a Transfer of a Controlling Interest in Key Principal, or (B) a Transfer of a Controlling Interest in any entity which owns, directly or indirectly through one or more intermediate entities, a Controlling Interest in Key Principal;

(6)

if Borrower or Key Principal is a trust, the termination or revocation of such trust; and

(7)

a conversion of Borrower from one type of legal entity into another type of legal entity, whether or not there is a Transfer.

Lender shall not be required to demonstrate any actual impairment of its security or any increased risk of default in order to exercise any of its remedies with respect to an Event of Default under this Section 21.

(b)

(b) The occurrence of any of the following events shall not constitute an Event of Default under this Instrument, notwithstanding any provision of Section 21(a) to the contrary:

(1)

a Transfer to which Lender has consented;

(2)

a Transfer that occurs by devise, descent, or by operation of law upon the death of a natural person;

(3)

the grant of a leasehold interest in an individual dwelling unit for a term of two years or less not containing an option to purchase;

(4)

a Transfer of obsolete or worn out Personalty or Fixtures that are contemporaneously replaced by items of equal or better function and quality, which are free of liens, encumbrances and security interests other than those created by the Loan Documents or consented to by Lender;

(5)

the grant of an easement, if before the grant Lender determines that the easement will not materially affect the operation or value of the

Mortgaged Property or Lender’s interest in the Mortgaged Property, and Borrower pays to Lender, upon demand, all costs and expenses incurred by Lender in connection with reviewing Borrower’s request; and

(6)

the creation of a tax lien or a mechanic’s, materialman’s or judgment lien against the Mortgaged Property which is bonded off, released of record or otherwise remedied to Lender’s satisfaction within 30 days of the date of creation.

(c)

(c) Lender shall consent, without any adjustment to the rate at which the Indebtedness secured by this Instrument bears interest or to any other economic terms of the Indebtedness, to a Transfer that would otherwise violate this Section 21 if, prior to the Transfer, Borrower has satisfied each of the following requirements:

(1)

the submission to Lender of all information required by Lender to make the determination required by this Section 21(c);

(2)

the absence of any Event of Default;

(3)

the transferee meets all of the eligibility, credit, management and other standards (including any standards with respect to previous relationships between Lender and the transferee and the organization of the transferee) customarily applied by Lender at the time of the proposed Transfer to the approval of borrowers in connection with the origination or purchase of similar mortgages, deeds of trust or deeds to secure debt on multifamily properties;

(4)

the Mortgaged Property, at the time of the proposed Transfer, meets all standards as to its physical condition that are customarily applied by Lender at the time of the proposed Transfer to the approval of properties in connection with the origination or purchase of similar mortgages on multifamily properties;

(5)

in the case of a Transfer of all or any part of the Mortgaged Property, or direct or indirect ownership interests in Borrower or Key Principal (if an entity), if transferor or any other person has obligations under any Loan Document, the execution by the transferee or one or more individuals or entities acceptable to Lender of an assumption agreement (including, if applicable, an Acknowledgement and Agreement of Key Principal to Personal Liability for Exceptions to Non-Recourse Liability) that is acceptable to Lender and that, among other things, requires the transferee to perform all obligations of transferor or such person set forth in such Loan Document, and may require that the transferee comply with any provisions of this Instrument or any other Loan Document which previously may have been waived by Lender;

(6)

if a guaranty has been executed and delivered in connection with the Note, this Instrument or any of the other Loan Documents, the Borrower causes one or more individuals or entities acceptable to Lender to execute and deliver to Lender a guaranty in a form acceptable to Lender; and

(7)

Lender’s receipt of all of the following:

(A)

a non-refundable review fee in the amount of $3,000 and a transfer fee equal to 1 percent of the outstanding Indebtedness immediately prior to the Transfer.

(B)

In addition, Borrower shall be required to reimburse Lender for all of Lender's out-of-pocket costs (including reasonable attorneys’ fees) incurred in reviewing the Transfer request, to the extent such expenses exceed $3,000.

(d)

(d) For purposes of this Section, the following terms shall have the meanings set forth below:

(1)

"Initial Owners" means, with respect to Borrower or any other entity, the persons or entities who on the date of the Note own in the aggregate 100% of the ownership interests in Borrower or that entity.

(2)

A Transfer of a "Controlling Interest" shall mean, with respect to any entity, the following:

(i)

if such entity is a general partnership or a joint venture, a Transfer of any general partnership interest or joint venture interest which would cause the Initial Owners to own less than 51% of all general partnership or joint venture interests in such entity;

(ii)

if such entity is a limited partnership, a Transfer of any general partnership interest;

(iii)

if such entity is a limited liability company or a limited liability partnership, a Transfer of any membership or other ownership interest which would cause the Initial Owners to own less than 51% of all membership or other ownership interests in such entity;

(iv)

if such entity is a corporation (other than a Publicly-Held Corporation) with only one class of voting stock, a Transfer of any voting stock which would cause the Initial Owners to own less than 51% of voting stock in such corporation;

(v)

if such entity is a corporation (other than a Publicly-Held Corporation) with more than one class of voting stock, a Transfer of any voting stock which would cause the Initial Owners to own less than a sufficient number of shares of voting stock having the power to elect the majority of directors of such corporation; and

(vi)

if such entity is a trust, the removal, appointment or substitution of a trustee of such trust other than (A) in the case of a land trust, or (B) if the trustee of such trust after such removal, appointment or substitution is a trustee identified in the trust agreement approved by Lender.

(3)

"Publicly-Held Corporation" shall mean a corporation the outstanding voting stock of which is registered under Section 12(b) or 12(g) of the Securities and Exchange Act of 1934, as amended.

22.

22. EVENTS OF DEFAULT.  The occurrence of any one or more of the following shall constitute an Event of Default under this Instrument:

(a)

(a) any failure by Borrower to pay or deposit when due any amount required by the Note, this Instrument or any other Loan Document;

(b)

(b) any failure by Borrower to maintain the insurance coverage required by Section 19;

(c)

(c) any failure by Borrower to comply with the provisions of Section 33;

(d)

(d) fraud or material misrepresentation or material omission by Borrower, or any of its officers, directors, trustees, general partners or managers, Key Principal or any guarantor in connection with (A) the application for or creation of the Indebtedness, (B) any financial statement, rent roll, or other report or information provided to Lender during the term of the Indebtedness, or (C) any request for Lender’s consent to any proposed action, including a request for disbursement of funds under any Collateral Agreement;

(e)

(e) any Event of Default under Section 21;

(f)

(f) the commencement of a forfeiture action or proceeding, whether civil or criminal, which, in Lender’s reasonable judgment, could result in a forfeiture of the Mortgaged Property or otherwise materially impair the lien created by this Instrument or Lender’s interest in the Mortgaged Property;

(g)

(g) any failure by Borrower to perform any of its obligations under this Instrument (other than those specified in Sections 22(a) through (f)), as and when required, which continues for a period of 30 days after notice of such failure by Lender to Borrower, but no such notice or grace period shall apply in the case of any such failure which could, in Lender’s judgment, absent immediate exercise by Lender of a right or remedy under this Instrument, result in harm to Lender, impairment of the Note or this Instrument or any other security given under any other Loan Document;

(h)

(h) any failure by Borrower to perform any of its obligations as and when required under any Loan Document other than this Instrument which continues beyond the applicable cure period, if any, specified in that Loan Document; and

(i)

(i) any exercise by the holder of any other debt instrument secured by a mortgage, deed of trust or deed to secure debt on the Mortgaged Property of a right to declare all amounts due under that debt instrument immediately due and payable.

23.

23. REMEDIES CUMULATIVE. Each right and remedy provided in this Instrument is distinct from all other rights or remedies under this Instrument or any other Loan Document or afforded by applicable law, and each shall be cumulative and may be exercised concurrently, independently, or successively, in any order.

24.

24. FORBEARANCE.

(a)

(a) Lender may (but shall not be obligated to) agree with Borrower, from time to time, and without giving notice to, or obtaining the consent of, or having any effect upon the obligations of, any guarantor or other third party obligor, to take any of the following actions:  extend the time for payment of all or any part of the Indebtedness; reduce the payments due under this Instrument, the Note, or any other Loan Document; release anyone liable for the payment of any amounts under this Instrument, the Note, or any other Loan Document; accept a renewal of the Note; modify the terms and time of payment of the Indebtedness; join in any extension or subordination agreement; release any Mortgaged Property; take or release other or additional security; modify the rate of interest or period of amortization of the Note or change the amount of the monthly installments payable under the Note; and otherwise modify this Instrument, the Note, or any other Loan Document.

(b)

(b) Any forbearance by Lender in exercising any right or remedy under the Note, this Instrument, or any other Loan Document or otherwise afforded by applicable law, shall not be a waiver of or preclude the exercise of any other right or remedy.  The acceptance by Lender of payment of all or any part of the Indebtedness after the due date of such payment, or in an amount which is less than the required payment, shall not be a waiver of Lender’s right to require prompt payment when due of all other payments on account of the Indebtedness or to exercise any remedies for any failure to make prompt payment. Enforcement by Lender of any security for the Indebtedness shall not constitute an election by Lender of remedies so as to preclude the exercise of any other right available to Lender.  Lender’s receipt of any awards or proceeds under Sections 19 and 20 shall not operate to cure or waive any Event of Default.

25.

25. LOAN CHARGES.  If any applicable law limiting the amount of interest or other charges permitted to be collected from Borrower is interpreted so that any charge provided for in any Loan Document, whether considered separately or together with other charges levied in connection with any other Loan Document, violates that law, and Borrower is entitled to the benefit of that law, that charge is hereby reduced to the extent necessary to eliminate that violation.  The amounts, if any, previously paid to Lender in excess of the permitted amounts shall be applied by Lender to reduce the principal of the Indebtedness.  For the purpose of determining whether any applicable law limiting the amount of interest or other charges permitted to be collected from Borrower has been violated, all Indebtedness which constitutes interest, as well as all other charges levied in connection with the Indebtedness which constitute interest, shall be deemed to be allocated and spread ov er the stated term of the Note.  Unless otherwise required by applicable law, such allocation and spreading shall be effected in such a manner that the rate of interest so computed is uniform throughout the stated term of the Note.

26.

26. WAIVER OF STATUTE OF LIMITATIONS.  Borrower hereby waives the right to assert any statute of limitations as a bar to the enforcement of the lien of this Instrument or to any action brought to enforce any Loan Document.

27.

27. WAIVER OF MARSHALLING.  Notwithstanding the existence of any other security interests in the Mortgaged Property held by Lender or by any other party, Lender shall have the right to determine the order in which any or all of the Mortgaged Property shall be subjected to the remedies provided in this Instrument, the Note, any other Loan Document or applicable law.  Lender shall have the right to determine the order in which any or all portions of the Indebtedness are satisfied from the proceeds realized upon the exercise of such remedies.  Borrower and any party who now or in the future acquires a security interest in the Mortgaged Property and who has actual or constructive notice of this Instrument waives any and all right to require the marshalling of assets or to require that any of the Mortgaged Property be sold in the inverse order of alienation or that any of the Mortgaged Property be sold in parcels or as an entirety in connection with the exercise of any of the remedies permitted by applicable law or provided in this Instrument.

28.

28. FURTHER ASSURANCES.  Borrower shall execute, acknowledge, and deliver, at its sole cost and expense, all further acts, deeds, conveyances, assignments, estoppel certificates, financing statements, transfers and assurances as Lender may require from time to time in order to better assure, grant, and convey to Lender the rights intended to be granted, now or in the future, to Lender under this Instrument and the Loan Documents.

29.

29. ESTOPPEL CERTIFICATE.  Within 10 days after a request from Lender, Borrower shall deliver to Lender a written statement, signed and acknowledged by Borrower, certifying to Lender or any person designated by Lender, as of the date of such statement, (i) that the Loan Documents are unmodified and in full force and effect  (or, if there have been modifications, that the Loan Documents are in full force and effect as modified and setting forth such modifications); (ii) the unpaid principal balance of the Note; (iii) the date to which interest under the Note has been paid; (iv) that Borrower is not in default in paying the Indebtedness or in performing or observing any of the covenants or agreements contained in this Instrument or any of the other Loan Documents (or, if the Borrower is in default, describing such default in reasonable detail); (v) whether or not there are then existing any setoffs or defenses known to Borrower against the e nforcement of any right or remedy of Lender under the Loan Documents; and (vi) any additional facts requested by Lender.

30.

30. GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE.

(a)

(a) This Instrument, and any Loan Document which does not itself expressly identify the law that is to apply to it, shall be governed by the laws of the jurisdiction in which the Land is located (the "Property Jurisdiction").

(b)

(b) Borrower agrees that any controversy arising under or in relation to the Note, this Instrument, or any other Loan Document shall be litigated exclusively in the Property Jurisdiction.  The state and federal courts and authorities with jurisdiction in the Property Jurisdiction shall have exclusive jurisdiction over all controversies which shall arise under or in relation to the Note, any security for the Indebtedness, or any other Loan Document.  Borrower irrevocably consents to service, jurisdiction, and venue of such courts for any such litigation and waives any other venue to which it might be entitled by virtue of domicile, habitual residence or otherwise.

31.

31. NOTICE.

(a)

(a) All notices, demands and other communications ("notice") under or concerning this Instrument shall be in writing.  Each notice shall be addressed to the intended recipient at its address set forth in this Instrument, and shall be deemed given on the earliest to occur of (1) the date when the notice is received by the addressee; (2) the first Business Day after the notice is delivered to a recognized overnight courier service, with arrangements made for payment of charges for next Business Day delivery; or (3) the third Business Day after the notice is deposited in the United States mail with postage prepaid, certified mail, return receipt requested.  As used in this Section 31, the term "Business Day" means any day other than a Saturday, a Sunday or any other day on which Lender is not open for business.

(b)

(b) Any party to this Instrument may change the address to which notices intended for it are to be directed by means of notice given to the other party in accordance with this Section 31.  Each party agrees that it will not refuse or reject delivery of any notice given in accordance with this Section 31, that it will acknowledge, in writing, the receipt of any notice upon request by the other party and that any notice rejected or refused by it shall be deemed for purposes of this Section 31 to have been received by the rejecting party on the date so refused or rejected, as conclusively established by the records of the U.S. Postal Service or the courier service.

(c)

(c) Any notice under the Note and any other Loan Document which does not specify how notices are to be given shall be given in accordance with this Section 31.

32.

32. SALE OF NOTE; CHANGE IN SERVICER.  The Note or a partial interest in the Note (together with this Instrument and the other Loan Documents) may be sold one or more times without prior notice to Borrower.  A sale may result in a change of the Loan Servicer.  There also may be one or more changes of the Loan Servicer unrelated to a sale of the Note.  If there is a change of the Loan Servicer, Borrower will be given notice of the change.

33.

33. SINGLE ASSET BORROWER.  Until the Indebtedness is paid in full, Borrower (a) shall not acquire any real or personal property other than the Mortgaged Property and personal property related to the operation and maintenance of the Mortgaged Property;  (b) shall not operate any business other than the management and operation of the Mortgaged Property; and (c) shall not maintain its assets in a way difficult to segregate and identify.

34.

34. SUCCESSORS AND ASSIGNS BOUND.  This Instrument shall bind, and the rights granted by this Instrument shall inure to, the respective successors and assigns of Lender and Borrower.  However, a Transfer not permitted by Section 21 shall be an Event of Default.

35.

35. JOINT AND SEVERAL LIABILITY.  If more than one person or entity signs this Instrument as Borrower, the obligations of such persons and entities shall be joint and several.

36.

36. RELATIONSHIP OF PARTIES; NO THIRD PARTY BENEFICIARY.

(a)

(a) The relationship between Lender and Borrower shall be solely that of creditor and debtor, respectively, and nothing contained in this Instrument shall create any other relationship between Lender and Borrower.

(b)

(b) No creditor of any party to this Instrument and no other person shall be a third party beneficiary of this Instrument or any other Loan Document.  Without limiting the generality of the preceding sentence, (1) any arrangement (a "Servicing Arrangement") between the Lender and any Loan Servicer for loss sharing or interim advancement of funds shall constitute a contractual obligation of such Loan Servicer that is independent of the obligation of Borrower for the payment of the Indebtedness, (2) Borrower shall not be a third party beneficiary of any Servicing Arrangement, and (3) no payment by the Loan Servicer under any Servicing Arrangement will reduce the amount of the Indebtedness.

37.

37. SEVERABILITY; AMENDMENTS.  The invalidity or unenforceability of any provision of this Instrument shall not affect the validity or enforceability of any other provision, and all other provisions shall remain in full force and effect.  This Instrument contains the entire agreement among the parties as to the rights granted and the obligations assumed in this Instrument.  This Instrument may not be amended or modified except by a writing signed by the party against whom enforcement is sought.

38.

38. CONSTRUCTION.  The captions and headings of the sections of this Instrument are for convenience only and shall be disregarded in construing this Instrument.  Any reference in this Instrument to an "Exhibit" or a "Section" shall, unless otherwise explicitly provided, be construed as referring, respectively, to an Exhibit attached to this Instrument or to a Section of this Instrument.  All Exhibits attached to or referred to in this Instrument are incorporated by reference into this Instrument.  Any reference in this Instrument to a statute or regulation shall be construed as referring to that statute or regulation as amended from time to time.  Use of the singular in this Agreement includes the plural and use of the plural includes the singular.  As used in this Instrument, the term "including" means "including, but not limited to."

39.

39. LOAN SERVICING.  All actions regarding the servicing of the loan evidenced by the Note, including the collection of payments, the giving and receipt of notice, inspections of the Property, inspections of books and records, and the granting of consents and approvals, may be taken by the Loan Servicer unless Borrower receives notice to the contrary.  If Borrower receives conflicting notices regarding the identity of the Loan Servicer or any other subject, any such notice from Lender shall govern.

40.

40. DISCLOSURE OF INFORMATION.  Lender may furnish information regarding Borrower or the Mortgaged Property to third parties with an existing or prospective interest in the servicing, enforcement, evaluation, performance, purchase or securitization of the Indebtedness, including trustees, master servicers, special servicers, rating agencies, and organizations maintaining databases on the underwriting and performance of multifamily mortgage loans.  Borrower irrevocably waives any and all rights it may have under applicable law to prohibit such disclosure, including any right of privacy.

41.

41. NO CHANGE IN FACTS OR CIRCUMSTANCES.  All information in the application for the loan submitted to Lender (the "Loan Application") and in all financial statements, rent rolls, reports, certificates and other documents submitted in connection with the Loan Application are complete and accurate in all material respects.  There has been no material adverse change in any fact or circumstance that would make any such information incomplete or inaccurate.

42.

42. SUBROGATION.  If, and to the extent that, the proceeds of the loan evidenced by the Note are used to pay, satisfy or discharge any obligation of Borrower for the payment of money that is secured by a pre-existing mortgage, deed of trust or other lien encumbering the Mortgaged Property (a "Prior Lien"), such loan proceeds shall be deemed to have been advanced by Lender at Borrower’s request, and Lender shall automatically, and without further action on its part, be subrogated to the rights, including lien priority, of the owner or holder of the obligation secured by the Prior Lien, whether or not the Prior Lien is released.

43.

43. ACCELERATION; REMEDIES.  At any time during the existence of an Event of Default, Lender, at Lender's option, may declare the Indebtedness to be immediately due and payable without further demand, and may institute an action of mortgage foreclosure pursuant to applicable law and proceed to final judgment and execution thereon for the amount of the Indebtedness (as of the date of such judgment) and may invoke any other remedies permitted by applicable law or provided in this Instrument or in any other Loan Document.  Lender shall be entitled to collect all costs and expenses incurred in pursuing such remedies, including attorneys' fees, costs of documentary evidence, abstracts and title reports and the attorneys’ out of pocket expenses described in Paragraph 11 of the Note.  If Lender is the purchaser at the foreclosure sale of the Mortgaged Property, the foreclosure sale price (Lender’s final bid) shall be applied against the Indebtedness.

44.

44. PREPARATION AND FILING OF FINANCING STATEMENTS.  Borrower authorizes Lender to prepare, execute and file, on Borrower’s behalf and without Borrower’s signature, all financing statements and continuation statements under the Uniform Commercial Code necessary or appropriate to give notice of, or to perfect, Lender’s security interest in UCC Collateral.

45.

45. RELEASE.  Upon payment of the Indebtedness, Lender shall release this Instrument.  Borrower shall pay Lender's reasonable costs incurred in releasing this Instrument.

46.

46. WAIVER OF VALUATION AND APPRAISEMENT.  Borrower waives all right of valuation and appraisement.

47.

47. WAIVER OF TRIAL BY JURY.  BORROWER AND LENDER EACH (A) COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS INSTRUMENT OR THE RELATIONSHIP BETWEEN THE PARTIES AS BORROWER AND LENDER THAT IS TRIABLE OF

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RIGHT BY A JURY AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO SUCH ISSUE TO THE EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN THE FUTURE.  THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL.

ATTACHED EXHIBITS.  The following Exhibits are attached to this Instrument:

X	Exhibit A	Description of the Land (required)
X	Exhibit B	Modifications to Instrument

IN WITNESS WHEREOF, Borrower has signed and delivered this Instrument or has caused this Instrument to be signed and delivered by its duly authorized representative.

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VMS NATIONAL PROPERTIES, an Illinois joint venture general partnership

By:  VMS National Residential Portfolio I, an Illinois limited partnership, its joint venture partner

By:  Maeril, Inc., a Delaware corporation, its general partner

By:   /s/Patti K. Fielding

Patti K. Fielding

Executive Vice President and Treasurer

By:  VMS National Residential Portfolio II, an Illinois limited partnership, its joint venture partner

By:  Maeril, Inc., a Delaware corporation, its general partner

By:   /s/Patti K. Fielding

Patti K. Fielding

Executive Vice President and Treasurer

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EXHIBIT A

[DESCRIPTION OF THE LAND]

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EXHIBIT B

Modifications to Security Instrument

The following modifications are made to the text of the Instrument that precedes this Exhibit:

1.

Paragraph 7 is amended to add the following subparagraph:

(f)

Notwithstanding the provisions of Subparagraph 7(a), Lender will not require Borrower to deposit with Lender amounts sufficient to accumulate with Lender the entire sum required to pay Taxes, provided that Borrower delivers to Lender a letter of credit and opinion of the letter of credit issuer’s counsel, both in form and content satisfactory to Lender in its sole discretion, in an amount equal to one (1) year’s Taxes.  In the event that Borrower does not timely pay Taxes or fails to provide Lender with proof of such payment, Lender shall have the right to (i) cash the letter of credit and apply the proceeds of the same to the payment of Taxes, (ii) deposit any proceeds in excess of the amount of Taxes then due and payable into Lender’s account for Imposition Deposits and (iii) require Borrower to deposit with Lender Imposition Deposits as provided in Subpar agraph 7(a).

2.

Paragraph 18(a) is amended to add the following sections:

(5)

the presence of any form of toxic mold or fungus in the Mortgaged Property of a type which may pose a significant risk to human health or the environment or would negatively impact the value of the Mortgaged Property (collectively “Mold”);

(6)

any activity, condition, event or omission that causes the growth of Mold on or in the Mortgaged Property.

3.

The defined term “Prohibited Activities or Conditions” is amended to include the matters described in Sections 18(a)(5) and 18(a)(6).

4.

A new Section 21(a)(8) is added as follows:

(8)

if, at any time, AIMCO REIT loses the authority or the ownership interests necessary to control, either directly or indirectly, Borrower and Guarantor and Borrower’s and Grantor’s Controlling Entities (“AIMCO Authorization”), Grantor covenants to send notice of such loss of AIMCO Authorization to Lender within fifteen (15) business days.  Such loss of AIMCO Authorization, shall be deemed a Transfer hereunder, and such Transfer shall constitute an Event of Default under Section 21(a) unless AIMCO REIT regains such AIMCO Authorization within sixty (60) days after the date of the loss.

5.

Section 33 is amended by adding the following sentences at the end of such Section:

“Borrower has disclosed to and provided Lender with information relating to assets it currently owns in addition to the Mortgaged Property (the “Disclosed Assets”).  Lender acknowledges that Borrower is not a single asset entity and agrees that Borrower may continue to own and operate the Disclosed Assets until September 30, 2007.  Until the Indebtedness is paid in full, Borrower (a) shall not acquire any real or personal property other than (i) the Mortgaged Property, (ii) the Disclosed Assets, (iii) personal property related to the operation and maintenance of the Mortgaged Property and the

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Disclosed Assets, and (iv) personal property and residences used primarily for the personal use of the Borrower and their family; (b) shall not operate any business other than the management and operation of the Mortgaged Property and the Disclosed Assets; (c) shall not maintain its assets in a way which is difficult to segregate and identify and (d) grant, create or permit the existence of any new or additional mortgage, deed of trust, deed to secure debt or other lien encumbrance on any of the Disclosed Assets, the Mortgaged Property or ownership interest in the Borrower, whether voluntary, involuntary or by operation of law.  In the event the Property shall be transferred, the single asset requirements of the original Section 33 of this Instrument shall apply for any transferee.”

6.

The following new Section is added at the end of the Instrument after the last numbered Section, but there are no Sections between the last numbered Section and Section 55:

“55.  CONVEYANCE.

No later than September 30, 2007, Borrower shall convey all of its interest in the Mortgaged Property (the “Conveyance”) to a Lender-approved, single-asset, single purpose entity.  Failure to complete the Conveyance shall constitute an event of default under Section 22 of the Security Instrument.

The documents evidencing the Conveyance shall be submitted to Lender for review prior to the Conveyance, and shall be in form and substance satisfactory to Lender.  Borrower agrees to pay all costs incurred in connection with the Conveyance; including, without limitation, the legal fees, if any, of Lender’s attorneys in connection with the required review and approval and the endorsement to the Lender’s title insurance policy.

Completion of the Conveyance shall be evidenced by submission to Lender of the recorded conveyance documents and an endorsement to the Lender’s title insurance policy.

It is understood that no transfer or application fee shall be due in connection with the Conveyance, and that the Conveyance shall not be deemed to violate Section 21 of the Security Instrument respecting Transfers.”

7.

AIMCO STANDARD.

A.

Section 1(v) is modified to read as follows:

(v)

"Personalty" means all furniture, furnishings, equipment, machinery, building materials, appliances, goods, supplies, tools, books, records (whether in written or electronic form), computer equipment (hardware and software) and other tangible personal property (other than Fixtures) which are used now or in the future exclusively in connection with the ownership, management or operation of the Land or the Improvements or are located on the Land or in the Improvements, and any operating agreements relating to the Land or the Improvements, and any surveys, plans and specifications and contracts for architectural, engineering and construction services relating to the Land or the Improvements and all other intangible property and rights exclusively relating to the operation of, or used exclusively in

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connection with, the Land or the Improvements including all governmental permits relating to any activities on the Land.

B.

Section 7(c) is modified to read as follows:

(c)

Notwithstanding the provisions of  Section 7(a), Lender will not require Borrower to deposit with Lender amounts sufficient to accumulate with Lender the entire sum required to pay the water and sewer charges, fire, hazard or other insurance premiums, and ground rents.  At least annually, Borrower must provide Lender with proof of payment of all such Impositions for which Lender is not collecting Imposition Deposits.  In the event that Borrower does not timely pay any of the Impositions, or fails to provide Lender with proof of such payment, or upon the occurrence of an Event of Default hereunder, or upon Borrower’s failure to maintain the Mortgaged Property in a satisfactory manner in accordance with the requirements of this Instrument, then in any such events, Lender may require Borrower to deposit with Lender the Imposition Deposits as provided in Section 7(a).

C.

Except in a case where Lender in its discretion determines that an emergency exists, Lender may take actions specified in Section 12(a) only if Lender has notified Borrower of Borrower's failure to perform any of its obligations under this Instrument or any other Loan Document and Borrower does not cure the failure within ten (10) days after such notice.  If Lender so determines that an emergency exists, Lender shall notify Borrower of the action taken within ten (10) days after the action is taken.

D.

Sections 14(b)(4) and 14(b)(5) are modified to read as follows:

(4)

within 120 days after the end of each fiscal year of Borrower, and at any other time upon Lender's request, a statement that identifies all owners of any interest in Borrower and each general partner in Borrower, and confirming that the ownership of each other Controlling Entity has not changed in a manner that violates Section 21(a);

(5)

promptly following Lender's request, quarterly or monthly income and expense statements for the Property relating to a quarterly or monthly period, as the case may be, ending no later than 45 days before the request;

E.

For purposes of Section 14(b), Borrower shall be deemed to have delivered any statement or document "upon Lender's request" if Borrower has delivered the document promptly following Lender's request.

F.

Notwithstanding Section (14)(c), unless an Event of Default has occurred and is continuing, or Lender has determined that an event having a Material Adverse Effect has occurred, Lender may require that the financial statements required by Sections 14(b)(1), 14(b)(2) and 14(b)(3) be audited, but may not require that any other financial statements required by Section 14 be audited.  Certification of a statement by the chief financial officer of the entity that is the subject of the statement or, in the case of a partnership, the chief

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financial officer of the general partner, will be acceptable to Lender as certification by an individual having authority to bind Borrower.

G.

Lender shall not have Borrower's books and records audited pursuant to Section 14(d) unless Lender has given Borrower notice specifying the statements, schedules and reports required by Section 14(b) that Borrower has failed to provide, and Borrower has not provided such statements by the expiration of ten days after such notice.

H.

So long as Borrower is contesting the amount and validity of any Imposition other than insurance premiums diligently and in good faith as described in Section 15(d) and all of the conditions specified in clauses (1) through (4) of Section 15(d) are satisfied, Lender will refrain from applying Imposition Deposits to payment of the contested Imposition.

I.

Section 15(e) and Section 16 are modified to read as follows:

15(e)

Borrower shall promptly deliver to Lender a copy of all notices of, and invoices for Impositions, and if Borrower pays any Imposition directly (which Borrower has no obligation to do unless Imposition Deposits have been waived or are insufficient and Lender has notified Borrower of that insufficiency), Borrower shall promptly furnish to Lender receipts evidencing such payments.

16.

LIENS; ENCUMBRANCES.  Borrower acknowledges that, to the extent provided in Section 21, the grant, creation or existence of any mortgage, deed of trust, deed to secure debt, security interest or other lien or encumbrance (a “Lien”) on the Mortgaged Property (other than the lien of this Instrument), or on certain ownership interests in Borrower, whether voluntary, involuntary or by operation of law, and whether or not such lien has priority over the lien of this Instrument, is a “Transfer” which constitutes an Event of Default.

J.

For purposes of Section 18(b), "pre-packaged supplies, cleaning materials and petroleum products customarily used in the operation and maintenance of comparable multifamily properties" shall include, without limitation, pool, spa, maintenance and gardening materials.

K.

The second sentence of Section 18(c) is modified to read as follows:

Borrower shall not lease or allow the sublease or use of all or any portion of the Mortgaged Property to any tenant or subtenant for nonresidential use by any user that, in the ordinary course of its business, would be reasonably expected to cause or permit any Prohibited Activity or Condition.

L.

For purposes of Section 18(d), Borrower shall only be obligated to pay out-of-pocket expenses incurred by Lender in connection with the monitoring and review of an O&M Program and Borrower's performance to the extent such expenses are reasonable.

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M.

Borrower's representation and warranty in Section 18(e)(4) regarding requirements for notification regarding releases of Hazardous Materials shall relate only to such releases, if any, at or affecting the Mortgaged Property.

N.

Section 18(e)(5) is modified to read as follows:

(5)

no event has occurred with respect to the Mortgaged Property that constitutes, or with the passing of time or the giving of notice would reasonably be expected to constitute, noncompliance with the terms of any Environmental Permit;

O.

Section 18(g) is modified to read as follows:

(g)

Borrower shall pay promptly the costs of any environmental inspections, tests or audits ("Environmental Inspections") required by Lender in connection with or in preparation for any foreclosure or deed in lieu of foreclosure.  Borrower shall also pay promptly the reasonable costs of any Environmental Inspections required by Lender in connection with, or as a condition of Lender's consent to any Transfer under Section 21, or required by Lender following a reasonable determination by Lender that Prohibited Activities or Conditions may exist.  Any such costs incurred by Lender (including the fees and out-of-pocket costs of attorneys and technical consultants whether incurred in connection with any judicial or administrative process or otherwise) which Borrower fails to pay promptly shall become an additional part of the Indebte dness as provided in Section 12. The results of all Environmental Inspections made by Lender in connection with or in preparation for any foreclosure or deed in lieu of foreclosure shall at all times remain the property of Lender and Lender shall have no obligation to disclose such results to or otherwise make such results available to Borrower or any other party.  Lender will make available to Borrower the results of all other Environmental Inspections made by Lender.  Lender hereby reserves the right, and Borrower hereby expressly authorizes Lender, to make available to any party, including any prospective bidder at a foreclosure sale of the Mortgaged Property, the results of any Environmental Inspections made by Lender with respect to the Mortgaged Property.  Borrower consents to Lender notifying any party (either as part of a notice of sale or otherwise) of the results of any of Lender's Environmental Inspections.  Except in the case of an Environmental Inspection performed in connect ion with a foreclosure or deed in lieu of foreclosure, or a disclosure of Environmental Inspection results that Lender is required by law to make, Lender shall notify Borrower of its intention to disclose such information and shall give Borrower ten days to provide supplemental information, explanations or corrections to accompany the disclosure. Borrower acknowledges that Lender cannot control or otherwise assure the truthfulness or accuracy of the results of any of its Environmental Inspections and that the release of such results to prospective bidders at a foreclosure sale of the Mortgaged Property may have a material and adverse effect upon the amount which a party may bid at such sale.  Borrower

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agrees that Lender shall have no liability whatsoever as a result of delivering the results of any of its Environmental Inspections to any third party, and Borrower hereby releases and forever discharges Lender from any and all claims, damages, or causes of action, arising, out of, connected with or incidental to the results of, the delivery of any of Lender's Environmental Inspections.

P.

Lender shall not commence Remedial Work under the second sentence of Section 18(h) unless Lender has given Borrower notice of its intention to do so and Borrower has not begun performing the Remedial Work within 10 days after such notice.

Q.

The following sentence is added at the end of Section 18(j):

However, Borrower shall have no obligation to indemnify any of the foregoing parties to the extent that the proceedings, claims, damages, penalties or costs arise out of the gross negligence or willful misconduct of Lender, any prior owner or holder of the Note, the Loan Servicer or any prior Loan Servicer.

R.

For purposes of Section 19(b), Lender will accept a duplicate original of any insurance policy.

S.

For purposes of Section 19(d), an insurance company will be acceptable to Lender if it has a rating in Best's Key Rating Guide of at least "A-" and a financial size category of at least “v,” provided that if Fannie Mae changes its requirements for the financial rating of insurers generally, Lender may change the requirement set forth in this sentence in a manner consistent with any such change.

T.

Clause (2) of Section 19(g) is modified to read as follows:

(2)

Lender determines, in its discretion, that the combination of insurance proceeds and amounts provided by the Borrower will be sufficient to complete the Restoration.

U.

For purposes of Section 19(h), Lender shall automatically succeed to rights of Borrower in and to insurance policies and unearned premiums only to the extent permitted by the applicable policies and insurance companies.

V.

Section 21(a)(2) is modified to read as follows:

(2)

if Borrower is a joint venture general partnership, a Transfer of (A) any general partnership interest (except for a Transfer to a Qualified REIT Subsidiary, as defined in Section 856(i)(2) of the Internal Revenue Code of 1986, 100% owned by Apartment Investment and Management Company, a Maryland corporation or to a Qualified REIT Subsidiary, as defined in Section 856 (l)(1) of the Internal Revenue Code of 1986, 100% owned by AIMCO OP), or (B) other interests in Borrower that would cause the Initial Owners of Borrower to own less than 51% of all partnership interests in Borrower;

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W.

New Sections 21(b)(7), 21(b)(8), 21(b)(9), and 21(b)(10) are added, as follows:

(7)

The Transfer of any joint venture partnership interests in Borrower provided no Change of Control occurs as a result of such Transfer.

(8)

The Transfer of shares of common stock, limited partnership interests or other beneficial or ownership interests or other forms of securities in AIMCO REIT or AIMCO OP, and the issuance of all varieties of convertible debt, equity and other similar securities of AIMCO REIT or AIMCO OP, and the subsequent Transfer of such securities; provided, however, that no Change of Control occurs as a result of such Transfer, either upon such Transfer or upon the subsequent conversion to equity of such convertible debt or other securities.

(9)

The issuance by AIMCO REIT or AIMCO OP of additional common stock, limited partnership interests or other beneficial or ownership interests, convertible debt, equity and other similar securities, and the subsequent Transfer of such convertible debt or securities; provided, however, that no Change of Control occurs as the result of such Transfer, either upon such Transfer or upon the subsequent conversion to equity of such convertible debt or other securities.

(10)

So long as AIMCO REIT owns 100% of the stock of AIMCO-LP, Inc., a Transfer of limited partnership interests that results in AIMCO-LP, Inc. owning not less than 50.1% of the limited partnership interests in AIMCO OP.

X.

Section 21(b)(8) shall apply only to a Transfer of an interest in a Controlling Entity that is prohibited by Section 21(a)(7).

Y.

A new Section 21(d) is added, as follows:

(d)

For purposes of this Section 21, the following terms shall be defined as follows:

(1)

"Change of Control" shall mean the earliest to occur of (A) the date an Acquiring Person becomes (by acquisition, consolidation, merger or otherwise), directly or indirectly, the beneficial owner of more than forty percent (40%) of the total Voting Equity Capital of AIMCO REIT then outstanding, or (B) the date on which AIMCO REIT shall cease to hold (whether directly or indirectly through a wholly owned intermediary entity such as AIMCO-LP, Inc. or AIMCO-GP, Inc.) at least 50.1% of the limited partnership interests in AIMCO OP, or (C) the date on which AIMCO REIT shall cease for any reason to hold (whether directly or indirectly) (i) the

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interests in the Joint Venture Partners held as of the date of this Instrument (as evidenced by organizational charts and documents submitted to Lender as of such date) and (ii) the Controlling Interest(s) in the Borrower, or (D) the replacement (other than solely by reason of retirement at age sixty-five or older, death or disability) of more than 50% (or such lesser percentage as is required for decisionmaking by the board of directors of trustees, if applicable) of the members of the board of directors (or trustee, if applicable) of AIMCO REIT over a one-year period where such replacement shall not have been approved by a vote of at least a majority of the board of directors (or trustees, if applicable) of AIMCO REIT then still in office who either were members of such board of directors (or trustees, if applicable) a t the beginning of such one year period or whose election as members of the board of directors (or trustees, if applicable) was previously so approved.

(2)

"Acquiring Person" shall mean a "person" or group of "persons" within the meaning of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended.  However, notwithstanding the foregoing, “Acquiring Person” shall not be deemed to include any member of the Borrower Control Group unless such member has, directly or indirectly, disposed of, sold or otherwise transferred to, or encumbered or restricted (whether by means of voting trust agreement or otherwise) for the benefit of an Acquiring Person, all or any portion of the Voting Equity Capital of AIMCO REIT directly or indirectly owned or controlled by such member or such member directly or indirectly votes all or any portion of the Voting Equity Capital of AIMCO REIT, directly or indirectly, owned or controlled by such member for the taking of any action which, direc tly or indirectly constitutes or would result in a Change of Control, in which event such member of the Borrower Control Group shall be deemed to constitute an Acquiring Person to the extent of the Voting Equity Capital of AIMCO REIT owned or controlled by such member.

(3)

"Borrower Control Group" shall mean Terry Considine, Peter K. Kompaniez, Richard S. Ellwood, J. Landis Martin, Thomas L. Rhodes and James N. Bailey.

(4)

A "Person" shall mean an individual, an estate, a trust, a corporation, a partnership, a limited liability company or any other organization or entity (whether governmental or private).

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(5)

"Security" shall have the same meaning as in Section 2(1) of the Securities Act of 1933, as amended.

(6)

"Controlling Interest(s)" shall mean (i) with respect to a partnership, such majority and/or managing general partner interests which, together with a majority of limited partnership interests if necessary for consent purposes, vest in the holder of such interests the sole power, right and authority to control the day to day operations of the Borrower; including, without limitation, the authority to manage, operate and finance the Mortgaged Property, (ii) with respect to a corporation, the number of shares which entitle the holder to elect a majority of the board of directors of the Borrower, and (iii) with respect to a limited liability company, such majority and/or managing member interests as vest in the holder of such interests the sole power, right and authority to control the day to day operations of the Borrower; including, without limitation, the authority to manage, operate and finance the Mortgaged Property.

(7)

"AIMCO REIT" shall mean Apartment Investment and Management Company, a corporation organized and existing under the laws of the State of Maryland.

(8)

"AIMCO OP" shall mean AIMCO Properties, L.P., a limited partnership organized and existing under the laws of the State of Delaware.

(9)

"Joint Venture Partners" shall mean the entities executing this Instrument on behalf of the Borrower and/or its successors or assigns in interest.

(10)

“Voting Equity Capital” shall mean Securities of any class or classes, the holders of which are ordinarily, in the absence of contingencies, entitled to elect a majority of the board of directors (or Persons performing similar functions).

V.

Section 22(a) is modified to read as follows:

(a)

any failure by Borrower to pay or deposit (i) any Imposition Deposit within three days after it is due, or (ii) any other amount required by the Note, this Instrument, or any other Loan Document when due.

W.

Section 28 shall obligate Borrower to provide such further assurances as Lender reasonably may require.

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X.

The words "Except as otherwise disclosed to Lender in writing, before the date of this Instrument" are added at the beginning of the second sentence of Section 41.

Y.

Section 37 is modified by adding: “; provided, however, that in the event of a Transfer, any or some or all of the Modifications to Instrument set forth in Exhibit B (if any) may be modified or rendered void by Lender at Lender’s option by notice to Borrower/transferee”.  The modifications set forth in this Exhibit B shall be null and void unless title to the Mortgaged Property is vested in an entity whose Controlling Interest(s) are directly or indirectly held by AIMCO REIT or AIMCO OP.

INITIALS

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EX-10

EXHIBIT 10.47

Northpark Apartments

MULTIFAMILY NOTE

(VARIABLE LOAN)

US $6,512,869.00

As of January 18, 2007

FOR VALUE RECEIVED, the undersigned (“Borrower”) promises to pay to the order of CAPMARK FINANCE INC., a California corporation, the principal sum of Six Million Five Hundred Twelve Thousand Eight Hundred Sixty-Nine and 00/100 Dollars (US $6,512,869.00), with interest on each Variable Loan at an annual rate as calculated in Section 3 hereof.

This Note is executed and delivered by Borrower pursuant to one of either (i) that certain Amended and Restated Loan Agreement, dated as of September 16, 2002, by and among certain borrowers signatory thereto and Lender or (ii) that certain Loan Agreement dated as of November 1, 2002, by and among certain borrowers signatory thereto and Lender.  As used herein, the term “Loan Agreement” shall mean whichever of the loan agreements described in the preceding sentence shall apply from time to time in accordance with their respective terms, along with all amendments, supplements, replacements, restatements or other modifications thereto or thereof from time to time made.  The Loan Agreement shall evidence the obligation of Borrower to repay a Variable Loan made by Lender to Borrower in accordance with the terms of the Loan Agreement.  This Note is entitled to the benef it and security of the Loan Documents provided for in the Loan Agreement, to which reference is hereby made for a statement of all of the terms and conditions under which the Variable Loan evidenced hereby is made.  The Loan Agreement requires certain of the terms of each Variable Loan to be evidenced by one or a series of Loan Confirmation Instruments, and reference is hereby made to each such Loan Confirmation Instrument for such terms.

1.

Defined Terms.  As used in this Note, (i) the term “Lender” means the holder of this Note, and (ii) the term “Indebtedness” means the principal of, interest on, or any other amounts due at any time under, this Note, the Security Instrument or any other Loan Document, including prepayment premiums, late charges, default interest, and advances to protect the security of the Security Instrument under Section 12 of the Security Instrument.  Event of Default and other capitalized terms used but not defined in this Note shall have the meanings given to such terms in the Loan Agreement or, if not defined in the Loan Agreement, as defined in the Security Instrument (as defined in Paragraph 5).

2.

Address for Payment.  All payments due under this Note shall be payable at Capmark Finance Inc., 116 Welsh Road, Horsham, PA  19044 , Attention:  Servicing – Account Manager, or such other place as may be designated by written notice to Borrower from or on behalf of Lender.

3.

Payment of Principal and Interest.  Principal and interest shall be paid as follows:

(a)

This Note shall evidence a Variable Loan made from time to time under the Loan Agreement.  The Variable Loan shall bear interest at a rate determined in accordance with Section 2.01 of the Loan Agreement.

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(b)

Borrower shall pay imputed interest on each Variable Loan in advance in the form of a Discount in accordance with Section 1.04(b) of the Loan Agreement (except that Borrower shall pay actual interest on the Variable Loan for the partial month period, if any, in accordance with Section 1.04(a) of the Loan Agreement).  

(c)

Borrower shall make monthly payments of principal each in the amount as set forth on the attached Amortization Schedule.  Lender shall apply each such principal payment to the outstanding principal amount of the Loan on the Rollover Date next following receipt of any such payment.  If not sooner paid, the entire principal amount of the Variable Loan shall be due and payable on the earlier of (i) the termination of the Loan Agreement pursuant to subsection (e) of Section 1.02 thereof, (ii) the fifth anniversary (unless such date is extended pursuant to Section 1.07 of the Loan Agreement, in which case, the tenth anniversary) of the Initial Closing Date or (iii) the maturity date of any outstanding MBS, unless either (A) not less than five Business Days prior to the maturity date of the outstanding MBS, a Borrower has requested that the outstanding MBS be renewed wi th a new MBS or converted to a Fixed Loan to take effect on the maturity date of the outstanding MBS and such new MBS has been issued or conversion has occurred or (B) the MBS is automatically renewed, which automatic renewal shall occur in the event that a Borrower does not make the request set forth in subpart (iii)(A) above and does not give Lender notice not less than five Business days prior to the maturity date of the outstanding MBS that the Variable Loan related to such outstanding MBS shall be paid on the maturity date of such outstanding MBS (the “Maturity Date”).  Any MBS that is issued as a result of an automatic renewal of a maturing MBS as contemplated by subpart (iii)(B) above shall have a maturity date of three (3) months after the MBS Issue Date.  

(d)

In addition to payment of principal and the Discount, Borrower shall pay the Variable Loan Fee due on each Variable Loan in accordance with Section 1.04(b)(ii) of the Loan Agreement.

4.

Application of Payments.  If at any time Lender receives, from Borrower or otherwise, any amount applicable to the Indebtedness that is less than all amounts due and payable at such time, Lender may apply that payment to amounts then due and payable in any manner and in any order determined by Lender, in Lender’s discretion.  Borrower agrees that neither Lender’s acceptance of a payment from Borrower in an amount that is less than all amounts then due and payable nor Lender’s application of such payment shall constitute or be deemed to constitute either a waiver of the unpaid amounts or an accord and satisfaction.

5.

Security.  The Indebtedness is secured, among other things, by a multifamily mortgage, deed to secure debt or deed of trust dated as of the date of this Note (the “Security Instrument”) and reference is made to the Security Instrument for other rights of Lender concerning the collateral for the Indebtedness.

6.

Acceleration.  If an Event of Default has occurred and is continuing, the entire unpaid principal balance, any accrued interest, the prepayment premium payable under Paragraph 10, if any, and all other amounts payable under this Note and any other Loan Document shall at once become due and payable, at the option of Lender, without any additional notice to Borrower.  Lender may exercise this option to accelerate regardless of any prior forbearance.

7.

Late Charge.  If any monthly amount payable under this Note or under the Security Instrument or any other Loan Document is not received by Lender within 10 days after the amount is due, Borrower shall pay to Lender, immediately and without demand by Lender, a late charge equal to 5 percent of such amount.  Borrower acknowledges that its failure to make timely payments will cause Lender to incur additional expenses in servicing and processing the loan evidenced by this Note (the “Loan”), and that it is extremely difficult and impractical to determine those additional expenses.  Borrower agrees that the late charge payable pursuant to

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this Paragraph represents a fair and reasonable estimate, taking into account all circumstances existing on the date of this Note, of the additional expenses Lender will incur by reason of such late payment.  The late charge is payable in addition to, and not in lieu of, any interest payable at the Default Rate pursuant to Paragraph 8.

8.

Default Rate.  So long as any monthly installment or any other payment due under this Note remains past due for 30 days or more, interest under this Note shall accrue on the unpaid principal balance from the earlier of the due date of the first unpaid monthly installment or other payment due, as applicable, at a rate (the “Default Rate”) equal to the lesser of 4 percentage points above the rate stated in the first paragraph of this Note or the maximum interest rate which may be collected from Borrower under applicable law.  If the unpaid principal balance and all accrued interest are not paid in full on the Maturity Date, the unpaid principal balance and all accrued interest shall bear interest from the Maturity Date at the Default Rate.  Borrower also acknowledges that its failure to make timely payments will cause Lender to incur additional expenses in s ervicing and processing the Loan, that, during the time that any monthly installment or payment under this Note is delinquent for more than 30 days, Lender will incur additional costs and expenses arising from its loss of the use of the money due and from the adverse impact on Lender’s ability to meet its other obligations and to take advantage of other investment opportunities, and that it is extremely difficult and impractical to determine those additional costs and expenses.  Borrower also acknowledges that, during the time that any monthly installment or payment due under this Note is delinquent for more than 30 days, Lender’s risk of nonpayment of this Note will be materially increased and Lender is entitled to be compensated for such increased risk.  Borrower agrees that the increase in the rate of interest payable under this Note to the Default Rate represents a fair and reasonable estimate, taking into account all circumstances existing on the date of this Note, of the additional costs and expenses Lender will incur by reason of Borrower’s delinquent payment and the additional compensation Lender is entitled to receive for the increased risks of nonpayment associated with a delinquent loan.

9.

Limits on Personal Liability.

(a)

Except as otherwise provided in this Paragraph 9, Borrower shall have no personal liability under this Note, the Security Instrument or any other Loan Document for the repayment of the Indebtedness or for the performance of any other obligations of Borrower under the Loan Documents, and Lender’s only recourse for the satisfaction of the Indebtedness and the performance of such obligations shall be Lender’s exercise of its rights and remedies with respect to the Mortgaged Property and any other collateral held by Lender as security for the Indebtedness.  This limitation on Borrower’s liability shall not limit or impair Lender’s enforcement of its rights against any guarantor of the Indebtedness or any guarantor of any obligations of Borrower.

(b)

Borrower shall be personally liable to Lender for the repayment of a portion of the Indebtedness equal to any loss or damage suffered by Lender as a result of (1) failure of Borrower to pay to Lender upon demand after an Event of Default, all Rents to which Lender is entitled under Section 3(a) of the Security Instrument and the amount of all security deposits collected by Borrower from tenants then in residence; (2) failure of Borrower to apply all insurance proceeds and condemnation proceeds as required by the Security Instrument; (3) failure of Borrower to comply with Section 14(d) or (e) of the Security Instrument relating to the delivery of books and records, statements, schedules and reports; (4)  fraud or written material misrepresentation by Borrower or any officer, director, partner, member or employee of Borrower in connection with the application for or creation of the Indebtedn ess or any request for any action or consent by Lender; or (5) failure to apply Rents, first, to the payment of reasonable operating expenses (other than Property management fees that are not currently payable pursuant to the terms of an Assignment of Management Agreement or any other agreement with Lender executed in connection with the Loan) and then to amounts  (“Debt

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Service Amounts”) payable under this Note, the Security Instrument or any other Loan Document (except that Borrower will not be personally liable (i) to the extent that Borrower lacks the legal right to direct the disbursement of such sums because of a bankruptcy, receivership or similar judicial proceeding, or (ii) with respect to Rents that are distributed in any calendar year if Borrower has paid all operating expenses and Debt Service Amounts for that calendar year).

(c)

Borrower shall become personally liable to Lender for the repayment of all of the Indebtedness upon the occurrence of any of the following Events of Default: (1) Borrower’s acquisition of any property or operation of any business not permitted by Section 33 of the Security Instrument; or (2) a Transfer that is an Event of Default under Section 21 of the Security Instrument.

(d)

To the extent that Borrower has personal liability under this Paragraph 9, Lender may exercise its rights against Borrower personally without regard to whether Lender has exercised any rights against the Mortgaged Property or any other security, or pursued any rights against any guarantor, or pursued any other rights available to Lender under this Note, the Security Instrument, any other Loan Document or applicable law. For purposes of this Paragraph 9, the term “Mortgaged Property” shall not include any funds that (1) have been applied by Borrower as required or permitted by the Security Instrument prior to the occurrence of an Event of Default, or (2) Borrower was unable to apply as required or permitted by the Security Instrument because of a bankruptcy, receivership, or similar judicial proceeding.

10.

Voluntary and Involuntary Prepayments.  Pursuant to the terms of the Loan Agreement, Borrower shall pay the entire amount of the Discount on any Variable Loan in advance.  Accordingly, any Variable Loan may be prepaid in whole or in part and at any time without penalty.  Borrower shall give Lender six (6) Business Days advance notice of any prepayment.

11.

Costs and Expenses.  Borrower shall pay on demand all reasonable expenses and costs, including reasonable fees and out-of-pocket expenses of attorneys and expert witnesses and costs of investigation, incurred by Lender as a result of any default under this Note or in connection with efforts to collect any amount due under this Note, or to enforce the provisions of any of the other Loan Documents, including those incurred in post-judgment collection efforts and in any bankruptcy proceeding (including any action for relief from the automatic stay of any bankruptcy proceeding) or judicial or non-judicial foreclosure proceeding.

12.

Forbearance.  Any forbearance by Lender in exercising any right or remedy under this Note, the Security Instrument, or any other Loan Document or otherwise afforded by applicable law, shall not be a waiver of or preclude the exercise of that or any other right or remedy.  The acceptance by Lender of any payment after the due date of such payment, or in an amount which is less than the required payment, shall not be a waiver of Lender’s right to require prompt payment when due of all other payments or to exercise any right or remedy with respect to any failure to make prompt payment.  Enforcement by Lender of any security for Borrower’s obligations under this Note shall not constitute an election by Lender of remedies so as to preclude the exercise of any other right or remedy available to Lender.

13.

Waivers.  Except as expressly provided in the Loan Agreement, presentment, demand, notice of dishonor, protest, notice of acceleration, notice of intent to demand or accelerate payment or maturity, presentment for payment, notice of nonpayment, grace, and diligence in collecting the Indebtedness are waived by Borrower and all endorsers and guarantors of this Note and all other third party obligors.

14.

Loan Charges.  If any applicable law limiting the amount of interest or other charges permitted to be collected from Borrower in connection with the Loan is interpreted so

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that any interest or other charge provided for in any Loan Document, whether considered separately or together with other charges provided for in any other Loan Document, violates that law, and Borrower is entitled to the benefit of that law, that interest or charge is hereby reduced to the extent necessary to eliminate that violation.  Borrower agrees to an effective rate of interest that is the stated rate of interest plus any additional rate of interest resulting from any other charges or fees that are to be paid by Borrower to Lender that may be found by a court of competent jurisdiction to be interest.  The amounts, if any, previously paid to Lender in excess of the permitted amounts shall be applied by Lender to reduce the unpaid principal balance of this Note.  For the purpose of determining whether any applicable law limiting the amount of intere st or other charges permitted to be collected from Borrower has been violated, all Indebtedness that constitutes interest, as well as all other charges made in connection with the Indebtedness that constitute interest, shall be deemed to be allocated and spread ratably over the stated term of the Note.  Unless otherwise required by applicable law, such allocation and spreading shall be effected in such a manner that the rate of interest so computed is uniform throughout the stated term of the Note.

15.

Commercial Purpose.  Borrower represents that the Indebtedness is being incurred by Borrower solely for the purpose of carrying on a business or commercial enterprise, and not for personal, family or household purposes.

16.

Counting of Days.  Except where otherwise specifically provided, any reference in this Note to a period of “days” means calendar days, not Business Days.

17.

Governing Law; Consent to Jurisdiction; WAIVER OF JURY TRIAL.  The provisions of Section 11.07 of the Loan Agreement (entitled “Choice of Law; Consent to Jurisdiction; Waiver of Jury Trial”) are hereby incorporated into this Note by this reference to the fullest extent as if the text of such Section were set forth in its entirety herein.

18.

Captions.  The captions of the paragraphs of this Note are for convenience only and shall be disregarded in construing this Note.

19.

Notices.  All notices, demands and other communications required or permitted to be given by Lender to Borrower pursuant to this Note shall be given in accordance with Section 11.09 of the Loan Agreement.

20.

Security for this Note.  Reference is made hereby to the Loan Agreement and the Security Documents for additional rights and remedies of Lender relating to the indebtedness evidenced by this Note.  Each Security Document shall be released in accordance with the provisions of the Security Documents.

21.

Loan May Not Be Reborrowed.  Borrower may not re-borrow any amounts under this Note which it has previously borrowed and repaid under this Note.

22.

Default Under Loan Agreement and Other Loan Documents.  The occurrence of an Event of Default under the Loan Agreement or the Security Instrument shall constitute an “Event of Default” under this Note in accordance with the Loan Agreement and the Security Instrument.  Upon the occurrence of an Event of Default under the Loan Agreement or the Security Instrument, the entire principal amount outstanding hereunder and accrued interest thereon shall at once become due and payable, at the option of the holder hereof.

23.

Loan Confirmation Instruments; Accounting for Variable Loans.  The terms of the Loan Agreement and this Note govern the repayment, and all other terms relating to the Variable Loan.  However, Borrower shall execute a Loan Confirmation Instrument to create a physical instrument evidencing each MBS issued to fund the Variable Loan.  The Loan Confirmation Instrument executed by Borrower in accordance with Section 2.02 of the Loan

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Agreement shall set forth the amount, term, Discount, Closing Date and certain other terms of each MBS issued to fund the Variable Loan.  The Loan Confirmation Instrument shall conclusively establish each of the terms described in the preceding sentence, absent manifest error.  The MBS evidenced by the Loan Confirmation Instrument does not represent a separate indebtedness from that evidenced by this Note.   In making proof of this Note, no other documents other than this Note shall be required.  In making proof of the amount and terms of the outstanding Variable Loans under this Note, this Note, the related Loan Confirmation Instruments, and Lender’s records concerning payments made by Borrower under this Note, shall be conclusive evidence of the terms and outstanding amounts of the Variable Loan, absent manifest error.

24.

Modifications to Note.  There are standard modifications to this Note that are attached as Exhibit B-1 and Exhibit B-2 hereto.  In addition, there may be special modifications to this Note attached as Exhibit B-3 hereto.  All such exhibits are hereby incorporated into this Note as a part hereof.

IN WITNESS WHEREOF, Borrower has signed and delivered this Note under seal or has caused this Note to be signed and delivered under seal by its duly authorized representative.  Borrower intends that this Note shall be deemed to be signed and delivered as a sealed instrument.

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VMS NATIONAL PROPERTIES, an Illinois joint venture general partnership

By:  VMS National Residential Portfolio I, an Illinois limited partnership, its joint venture partner

By:  Maeril, Inc., a Delaware corporation, its general partner

By: /s/Patti K. Fielding

Patti K. Fielding

Executive Vice President and Treasurer

By:  VMS National Residential Portfolio II, an Illinois limited partnership, its joint venture partner

By:  Maeril, Inc., a Delaware corporation, its general partner

By: /s/Patti K. Fielding

Patti K. Fielding

Executive Vice President and Treasurer

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PAY TO THE ORDER OF FANNIE MAE, WITHOUT RECOURSE.

CAPMARK FINANCE INC., a California corporation

By: /s/Max W. Foore

Max W. Foore

Vice President

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EXHIBIT B-1

GMACCM LOAN AGREEMENT MODIFICATIONS

During any time that the terms, covenants and provisions of that certain Loan Agreement dated as of November 1, 2002 and more particularly described in the second paragraph on page 1 of the Note apply to the Variable Loan evidenced by the Note, paragraphs 3 and 23 of the Note are amended and replaced with the following substitute paragraphs 3 and 23:

“3.

Payment of Principal and Interest.  Principal and interest shall be paid as follows:

(a)

This Note shall evidence a Variable Loan made from time to time under the Loan Agreement.  Borrower shall not be required to make monthly principal payments prior to the Fannie Mae Addition Date, but shall make monthly payments of principal after the Fannie Mae Reassignment Date, if it occurs, as set forth in Section 1.04(d) of the Loan Agreement.

(b)

Borrower shall pay actual interest on the Variable Loan during the period described in accordance with Section 1.04(a) of the Loan Agreement.  Borrower shall pay interest on its Variable Rate Loan in arrears at a rate equal to LIBOR Rate plus a number of basis points determined in accordance with Section 2.01 of the Loan Agreement.  For purposes of the previous sentence, the LIBOR Rate shall be reset every ninety (90) days commencing on the date that is ninety (90) days after the Initial Closing Date.  On the date the Variable Loan is funded, Borrower shall pay interest in advance from the date of funding through January 31, 2007.  On March 1, 2007 and on the first (1st) day of each calendar month thereafter, Borrower shall pay interest in arrears calculated for the actual number of days since the first (1st) day of the previous calendar month.

(c)

If not sooner paid, the entire principal amount of the Variable Loan shall be due and payable in accordance with Section 1.02 of the Loan Agreement.  

(d)

Borrower shall not pay any Discount.

23.

Loan Confirmation Instruments; Accounting for Variable Loans.  The terms of the Loan Agreement and this Note govern the repayment, and all other terms relating to the Variable Loan.  However, Borrower shall execute one or a series of Loan Confirmation Instruments to create a physical instrument evidencing the terms of the Variable Loan.  The Loan Confirmation Instrument or series of Loan Confirmation Instruments executed by Borrower in accordance with Section 2.02 of the Loan Agreement shall set forth the amount, term, the interest rate spread over the LIBOR Rate Closing Date and certain other terms related to the funding the Variable Loan.  The Loan Confirmation Instrument shall conclusively establish each of the terms described in the preceding sentence, absent manifest error.  The variable terms evidenced by the Loan Confirmation Instrument do not represe nt a separate indebtedness from that evidenced by this Note.   In making proof of this Note, no other documents other than this Note shall be required.  In making proof of the amount and terms of the outstanding Variable Loans under this Note, this Note, the related Loan Confirmation Instruments, and Lender’s records concerning payments made by Borrower under this Note, shall be conclusive evidence of the terms and outstanding amounts of the Variable Loan, absent manifest error.”

During any time that the terms, covenants and provisions of that certain Amended and Restated Loan Agreement dated as of September 16, 2002 and more particularly described in the second paragraph on page 1 of the Note apply to the Variable Loan evidenced by the Note, this Exhibit B-1 shall not apply and paragraphs 3 and 23 of the Note shall not be amended or replaced with the provisions set forth in this Exhibit B-1.

B-1

EXHIBIT B-2

AIMCO MODIFICATIONS

The following modifications are made to the text of the Note that precedes this Exhibit:

1.

Section 9(b)(4) is modified by deleting “or” at the end thereof.

2.

Section 9(b)(5) is modified to read as follows:

“(5) failure to apply Rents, first, to the payment of reasonable operating expenses (other than Property management fees that are not currently payable pursuant to the terms of an Assignment of Management Agreement or any other agreement with Lender executed in connection with the Loan) and then to amounts (“Debt Service Amounts”) payable under this Note, the Security Instrument or any other Loan Document (except that Borrower will not be personally liable (i) to the extent that Borrower lacks the legal right to direct the disbursement of such sums because of a bankruptcy, receivership or similar judicial proceeding, or (ii) with respect to Rents that are distributed in any calendar quarter if Borrower has paid all operating expenses and Debt Service Amounts for such calendar quarter to date); or”

3.

A new Section 9(b)(6) is added following Section 9(b)(5), stating as follows:

“(6) failure to pay when due any water and sewer charges, fire, hazard or other insurance premiums and ground rents owing from time to time in connection with the Mortgaged Property.”

B-2

EX-10

EXHIBIT 10.48

Northpark Apartments

GUARANTY

This Guaranty (the “Guaranty”) is made and entered into as of the 18^th day of January, 2007 by AIMCO PROPERTIES, L.P., a Delaware limited partnership (the “Guarantor”), for the benefit of CAPMARK FINANCE INC., a California corporation (“Lender”).

RECITALS

A.

Lender has agreed to execute both (i) that certain Amended and Restated Loan Agreement, dated as of September 16, 2002, by and among AIMCO Properties, L.P., a Delaware limited partnership, certain borrowers signatory thereto and Lender and (ii) that certain Loan Agreement dated as of November 1, 2002, by and among certain borrowers signatory thereto and Lender (as amended, supplemental or otherwise modified or amended and restated from time to time, the “Loan Agreement”),  pursuant to which, inter alia, Lender has agreed, subject to the terms, conditions and limitations of the Loan Agreement, to make a loan to VMS National Properties, an Illinois joint venture general partnership (the “Borrower”) from time to time loan to be evidenced by the Note (the “Loan”).  Terms used herein not defined herein have the definition given them in the Loan Agreement.

B.

The repayment of the Loan and all of the Obligations of the Borrower under the Loan Agreement or the other Loan Documents are guaranteed by this Guaranty to the extent of Borrower’s personal liability as provided in Section 9 of the Note evidencing the Loan, and except for such obligations described herein, Guarantor shall have no liability in connection with, or responsibility to perform, under or in accordance with the Loan Agreement or other Loan Documents.

C.

Guarantor owns, directly or indirectly, an ownership interest in the Borrower and will receive a direct and material benefit from the Loans to the Borrower.

D.

Lender is willing to make the Loan to the Borrower only if Guarantor agrees to enter into this Guaranty.

NOW, THEREFORE, in order to induce Lender to make the Loan to Borrower, and in consideration thereof, Guarantor hereby agrees as follows:

Section 1.

Definitions.  All capitalized terms used but not defined in this Guaranty shall have the meanings ascribed to such terms in the Loan Agreement.  The following terms shall have the meaning set forth below for purposes of this Guaranty:

“Material Adverse Effect” means, with respect to any circumstance, act, condition or event of whatever nature (including any adverse determination in any litigation, arbitration, or governmental investigation or proceeding), whether singly or in conjunction with any other event or events, act or acts, condition or conditions, or circumstance or circumstances, whether or not related, a material adverse change in or a materially adverse effect upon the present or future ability of the Guarantor, to the extent specifically referred to in the applicable provision of that Guaranty, to perform the Guaranteed Obligations.

“Net Worth” means, as of any date of determination and without double counting any item, the sum of the capital stock or other capital equity interests and additional paid-in capital

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plus retained earnings (or minus accumulated deficits) of the Guarantor, the REIT and their respective Subsidiaries on a consolidated basis determined in conformity with GAAP.

“REIT” means Apartment Investment and Management Company, a Maryland corporation.

“Subsidiary” means, with respect to the REIT, the Guarantor or an Affiliate of either of them, a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise controlled, directly or indirectly, through one or more intermediaries, or both, by the REIT, the Guarantor or an Affiliate of either of them.

Section 2.

Guaranty of Payment.  Guarantor irrevocably, absolutely and unconditionally guarantees to Lender all of the following (collectively, the “Guaranteed Obligations”):  the due and punctual payment when due, whether at maturity or earlier, by reason of acceleration or otherwise, at all times, of all amounts for which Borrower is personally liable under Section 9 of the Note.

This Guaranty shall be an unconditional guaranty of payment and performance and not of collection, and is in no way conditioned upon any attempt by Lender to pursue or exhaust any remedy against Borrower.  This Guaranty is a continuing guaranty which shall remain in full force and effect until all of the Guaranteed Obligations have been paid and performed in full; and Guarantor shall not be released from any obligations to Lender under this Guaranty as long as any amount payable by the Borrower to Lender, or any obligation by the Borrower, under the Loan Documents is not performed, satisfied, settled or paid in full.

Section 3.

Form of Payment.  All payments under this Guaranty shall be made to Lender in immediately available funds, without reduction by any recoupment, set-off, counterclaim or cross-claim against Lender.

Section 4.

Guarantor’s Obligations are Absolute.  The obligations of Guarantor under this Guaranty shall be absolute and unconditional, shall not be subject to any counterclaim, set-off, recoupment, deduction, or defense based upon any claim Guarantor may have against Lender or Borrower and shall remain in full force and effect without regard to, and shall not be released, discharged or terminated or in any other way affected by, any circumstance or condition (whether or not Guarantor shall have any knowledge or notice thereof), including, without limitation:

(a)

any amendment or modification of, or extension of time for payment of any of the principal of, interest on or other amounts payable under the Loan Documents;

(b)

any exercise or non-exercise by Lender of any right, power or remedy under or in respect of the Loan Documents, or any waiver, consent, forbearance, indulgence or other action, inaction or omission by Lender under or in respect of the Loan Documents;

(c)

any assignment, sale or other transfer of Borrower’s interest in all or any part of the real or personal property which at any time constitutes collateral for the payment of the Guaranteed Obligations, including, without limitation, a conveyance of such property by Borrower to Lender by deed in lieu of foreclosure;

(d)

any bankruptcy, insolvency, reorganization, adjustment, dissolution, liquidation or other like proceeding involving or affecting Borrower or Lender or their respective properties or

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creditors, or any action taken with respect to the Loan Documents by any trustee or receiver of Borrower or Lender, or by any court, in any such proceeding;

(e)

any invalidity or unenforceability, in whole or in part, of any term or provision of the Loan Documents or Borrower’s incapacity or lack of authority to enter into the Loan Documents;

(f)

any release, compromise, settlement or discharge with respect to all or any portion of Borrower’s obligations under the Loan Documents;

(g)

any acceptance of additional or substituted collateral for payment of the Guaranteed Obligations or any release or subordination of any collateral held at any time by Lender as security for the payment of the Guaranteed Obligations; or

(h)

any resort to Guarantor for payment of all or any portion of the Guaranteed Obligations, whether or not Lender shall have resorted to any collateral securing the Guaranteed Obligations, if any, or shall have proceeded to pursue or exhaust its remedies against Borrower (or any other Person) primarily or secondarily liable for the Guaranteed Obligations.

No exercise, delay in exercise or non-exercise by Lender of any right hereby given it, no dealing by Lender with Borrower, Guarantor or any other Person, no change, impairment or suspension of any right or remedy of Lender, and no act or thing which, but for this provision, could act as a release or exoneration of the liabilities of Guarantor hereunder, shall in any way affect, decrease, diminish or impair any of the obligations of Guarantor hereunder or give Guarantor or any other Person any recourse or defense against Lender.

Section 5.

Waiver.  Guarantor unconditionally waives the following:

(a)

notice of acceptance of this Guaranty and notice of any of the matters referred to in Section 4 hereof;

(b)

all notices which may be required by statute, rule of law or otherwise to preserve intact any rights which Lender may have against Guarantor under this Guaranty, including, without limitation, any demand, proof or notice of non-payment of any of the principal of, interest on or other amounts payable under the Loan Documents, and notice of any failure on the part of Borrower to perform and comply with any covenant, agreement, term or condition of the Loan Documents;

(c)

any right to the enforcement, assertion or exercise of any right, power or remedy conferred upon Lender in the Loan Documents or otherwise;

(d)

any requirement that Lender act with diligence in enforcing its rights under the Loan Documents or this Guaranty;

(e)

any right to require Lender to proceed against or exhaust its recourse against Borrower or any security or collateral held by Lender, if any, at any time for the payment of the Guaranteed Obligations or to pursue any other remedy in its power before being entitled to payment from Guarantor under this Guaranty or before proceeding against Guarantor;

(f)

any failure by Lender to file or enforce a claim against the estate (either in administration, bankruptcy or any other proceeding) of Borrower or any other Person;

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(g)

any defense based upon an election of remedies by Lender which destroys or otherwise impairs the subrogation rights of Guarantor or the right of Guarantor (after payment of the Guaranteed Obligations) to proceed against Borrower for reimbursement, or both;

(h)

any defense based upon any taking, modification or release of any collateral for the Guaranteed Obligations, if any, or any failure to perfect any security interest in, or the taking of, or failure to take any other action with respect to, any collateral securing payment of the Guaranteed Obligations, if any;

(i)

any defense based upon the addition, substitution or release, in whole or in part, of any Person(s), including, without limitation, another guarantor, primarily or secondarily liable for or in respect of the Guaranteed Obligations;

(j)

any rights or defenses based upon an offset by Guarantor against any obligation now or hereafter owed to Guarantor by Borrower; and

(k)

all other notices which may or might be lawfully waived by Guarantor;

it being the intention hereof that Guarantor shall remain liable as principal, to the extent set forth in this Guaranty, until the payment and performance in full of the Guaranteed Obligations, notwithstanding any act, omission or thing which might otherwise operate as a legal or equitable discharge of Guarantor other than the payment and performance in full of the Guaranteed Obligations.  No delay by Lender in exercising any rights and/or powers hereunder or in taking any action to enforce Borrower’s obligations under the Loan Documents shall operate as a waiver as to such rights or powers or in any manner prejudice any and all of Lender’s rights and powers hereunder against Guarantor.  The intention of Guarantor under this Guaranty is that, so long as any of the Guaranteed Obligations remains unsatisfied, the obligations of Guarantor hereunder shall not be discharged except by performance and then only to the extent of such performance.  Guarantor agrees that Guarantor’s obligations hereunder shall not be affected by any circumstances, whether or not referred to in this Guaranty, which might constitute a legal or equitable discharge of a surety or guarantor.

Section 6.

Election of Remedies.  This Guaranty may be enforced from time to time, as often as occasion therefor may arise, and without any requirement that Lender must first pursue or exhaust any remedies available to it against Borrower under the Loan Documents or against any other Person or resort to any collateral at any time held by it for performance of the Guaranteed Obligations, if any, or any other source or means of obtaining payment of any of the Guaranteed Obligations.

Section 7.

Representations and Warranties of Guarantor.  Guarantor hereby represents and warrants to the Lender as follows:

(a)

Due Organization; Qualification.  Guarantor is qualified to transact business and is in good standing in the State in which it is organized and in each other jurisdiction in which such qualification and/or standing is necessary to the conduct of its business and where the failure to be so qualified would adversely affect the validity of, the enforceability of, or the ability of Guarantor to perform the Guaranteed Obligations.

(b)

Power and Authority.  Guarantor has the requisite power and authority (i) to own its properties and to carry on its business as now conducted and as contemplated to be conducted in connection with the performance of the Guaranteed Obligations, and (ii) to execute and deliver this Guaranty and to carry out the transactions contemplated by this Guaranty.

(c)

Due Authorization.  The execution, delivery and performance of this Guaranty has been duly authorized by all necessary action and proceedings by or on behalf of Guarantor,

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and no further approvals or filings of any kind, including any approval of or filing with any Governmental Authority, are required by or on behalf of Guarantor as a condition to the valid execution, delivery and performance by Guarantor of this Guaranty.

(d)

Valid and Binding Obligations.  This Guaranty has been duly authorized, executed and delivered by Guarantor and constitutes the legal, valid and binding obligations of Guarantor, enforceable against Guarantor in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles affecting the enforcement of creditors’ rights generally or by equitable principles or by the exercise of discretion by any court.

(e)

Non-contravention: No Liens.  Neither the execution and delivery of this Guaranty, nor the fulfillment of or compliance with the terms and conditions of this Guaranty nor the payment or performance of the Guaranteed Obligations:

(i)

does or will conflict with or result in any breach or violation of any Applicable Law enacted or issued by any Governmental Authority or other agency having jurisdiction over Guarantor, any of the Mortgaged Properties or any other portion of the Collateral or assets of Guarantor, or any judgment or order applicable to Guarantor or to which Guarantor is subject;

(ii)

does or will conflict with or result in any material breach or violation of, or constitute a default under, any of the terms, conditions or provisions of Guarantor’s Organizational Documents, any indenture, existing agreement or other instrument to which Guarantor is a party or to which Guarantor, any of the Mortgaged Properties or any other portion of the Collateral or other assets of Guarantor is subject; or

(iii)

does or will require the consent or approval of any creditor of Guarantor, any Governmental Authority or any other Person except such consents or approvals which have already been obtained.

(f)

Pending Litigation or Other Proceedings.  Since the date of the most recent financial statements delivered to Lender pursuant to Section 8(b) of this Guaranty, there is no pending or, to the best knowledge of guarantor, threatened action, suit, proceeding or investigation, at law or in equity, before any court, board, body or official of any Governmental Authority or arbitrator which, if decided adversely to Guarantor, would have, or may reasonably be expected to have, a Material Adverse Effect on Guarantor. Guarantor is not in default with respect to any order of any Governmental Authority to any extent which would have, or may reasonably be expected to have, a Material Adverse Effect on Guarantor.

(g)

Solvency.  Guarantor is not insolvent and will not be rendered insolvent by the transaction contemplated by this Guaranty and after giving effect to such transaction, Guarantor will not be left with an unreasonably small amount of capital with which to engage in its business or undertakings, nor will Guarantor have incurred, have intended to incur, or believe that it has incurred, debts beyond its ability to pay such debts as they mature. Guarantor did not receive less than a reasonably equivalent value in exchange for incurrence of the Guaranteed Obligations.  There (i) is no contemplated, pending or, to the best of Guarantor’s knowledge, threatened bankruptcy, reorganization, receivership, insolvency or like proceeding, whether voluntary or involuntary, affecting Guarantor and (ii) has been no assertion or exercise of jurisdiction over Guarantor by any court empowered to exercise bankruptcy powers.

(h)

No Contractual Defaults.  There are no material defaults by Guarantor or, to the knowledge of Guarantor, by any other Person under any contract to which Guarantor is a party other than defaults which do not have, and are not reasonably be expected to have, a Material Adverse Effect on Guarantor.  Neither Guarantor nor, to the knowledge of Guarantor, any other

5

Person, has received notice or has any knowledge of any existing circumstances in respect of which it could receive any notice of default or breach in respect of any contracts, which default would have, or which may reasonably be expected to have, a Material Adverse Effect on Guarantor.

(i)

Representations True and Correct.  The representations and warranties made by Guarantor in this Guaranty are true, complete and correct in all material respects as of the Initial Closing Date and do not contain any untrue statement of material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.

(j)

ERISA.  Guarantor is in compliance in all material respects with all applicable provisions of ERISA and has not incurred any liability to the PBGC on a Plan under Title LV of ERISA.  None of the assets of Guarantor constitute plan assets (within the meaning of Department of Labor Regulation § 2510.3-101) of any employee benefit plan subject to Title I of ERISA.

(k)

Financial Information.  The financial statements of Guarantor which have been furnished to the Lender are complete and accurate in all material respects and present fairly the financial condition of Guarantor, as of its date in accordance with GAAP, applied on a consistent basis.  Since the date of the most recent of such financial statements no event has occurred which would have, or may reasonably be expected to have a Material Adverse Effect on Guarantor, except as disclosed in any filings made by Guarantor or its affiliates with the United States Securities and Exchange Commission (“SEC”).  Guarantor has no material contingent obligations which are not otherwise disclosed in its most recent financial statements except as disclosed in any filings made by Guarantor or its affiliates with the SEC.

(l)

Accuracy of Information.  No information, statement or report furnished in writing to the Lender by Guarantor concerning the Guarantor in connection with this Guaranty or any other Loan Document or in connection with the consummation of the transactions contemplated hereby and thereby contains any material misstatement of fact or omits to state a material fact necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading as of the date made, except to the extent that such misstatements and omissions when considered in the totality of such information, statements and reports furnished by Guarantor are not materially misleading in the aggregate; provided, however, the foregoing representation and warranty shall not apply to any information, statement or report prepared by any third party.

(m)

No Conflicts of Interest.  To the best knowledge of Guarantor, no member, officer, agent or employee of the Lender has been or is in any manner interested, directly or indirectly, in that Person’s own name, or in the name of any other Person, in the Guarantor (other than through the ownership of publicly traded shares of common stock of affiliates of the Guarantor or limited partnership units of Guarantor), the Loan Documents, or any Mortgaged Property, in any contract for property or materials to be furnished or used in connection with such Mortgaged Property or in any aspect of the transactions contemplated by the Loan Documents.

(n)

Governmental Approvals.  To the best of Guarantor’s knowledge, no Governmental Approval not already obtained or made is required for the execution and delivery of this Guaranty or the performance of the terms and provisions hereof by Guarantor.

(o)

Governmental Orders.  Guarantor is not presently under any cease or desist order or other orders of a similar nature, temporary or permanent, of any Governmental Authority which would have the effect of preventing or hindering performance of its duties hereunder, nor

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are there any proceedings presently in progress or to its knowledge contemplated which would, if successful, lead to the issuance of any such order.

(p)

No Reliance.  Guarantor acknowledges, represents and warrants that it understands the nature and structure of the transactions contemplated by this Guaranty and the other Loan Documents; that it is familiar with the provisions of all of the documents and instruments relating to such transactions; that it understands the risks inherent in such transactions, including the risk of loss of all or any of the Mortgaged Properties; and that it has not relied on the Lender or Fannie Mae for any guidance or expertise in analyzing the financial or other consequences of the transactions contemplated by this Guaranty or any other Loan Document or otherwise relied on the Lender or Fannie Mae in any manner in connection with interpreting, entering into or otherwise in connection with this Guaranty, any other Loan Document or any of the matters contemplated hereby or thereby.

(q)

Compliance with Applicable Law.  Guarantor is in compliance with Applicable Law, including all Governmental Approvals, if any, except for such items of noncompliance that, singly or in the aggregate, have not had and are not reasonably expected to cause, a Material Adverse Effect on Guarantor.

(r)

Contracts with Affiliates.  Except for the management agreement relating to each of the Mortgaged Properties or in the ordinary course of business and on terms which are no less favorable to the Guarantor than would be obtained in a corporate arms-length transaction with an unrelated third party, Guarantor has not entered into and is not a party to any material contract, lease or other agreement with any Affiliate of Guarantor for the provision of any service, materials or supplies relating to any Mortgaged Property.

Section 8.

Affirmative Covenants of Guarantor.  Guarantor agrees and covenants with the Lender that, at all times during the Term of this Guaranty:

(a)

Maintenance of Existence.  Guarantor shall maintain its existence and continue to be a limited partnership organized under the laws of the state of its organization. Guarantor shall continue to be duly qualified to do business in each jurisdiction in which such qualification is necessary to the conduct of its business and where the failure to be so qualified would adversely affect the validity of, the enforceability of, or the ability to perform, its obligations under this Guaranty.

(b)

Financial Statements; Accountants’ Reports: Other Information.  The Guarantor shall keep and maintain at all times complete and accurate books of accounts and records in sufficient detail to correctly reflect all of the Guarantor’s financial transactions and assets. In addition, the Guarantor shall furnish, or cause to be furnished, to the Lender the following:

(i)

So long as Guarantor is a reporting company under the Securities and Exchange Act of 1934 (the “’34 Act”), promptly upon their becoming available, copies of (A) all 10K’s, 10Q’s, 8K’s, annual reports and proxy statements, and all replacement, substitute or similar filings or reports required to be filed after the date of this Guaranty by the SEC or other Governmental Authority exercising similar functions, and (B) all press releases and other statements made available generally by Guarantor to the public concerning material developments in the business of Guarantor.

(ii)

In the event Guarantor is not a reporting company under the ’34 Act,

(A)

Annual Financial Statements.  As soon as available, and in any event within 90 days after the close of its fiscal year during the Term of this Agreement, the audited balance sheet of Guarantor as of the end of such fiscal year, the audited statement of income, equity and retained earnings of Guarantor

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for such fiscal year and the audited statement of cash flows of Guarantor for such fiscal year, all in reasonable detail and stating in comparative form the respective figures for the corresponding date and period in the prior fiscal year, prepared in accordance with GAAP, consistently applied, and accompanied by a certificate of Guarantor’s independent certified public accountants to the effect that such financial statements have been prepared in accordance with GAAP, consistently applied, and that such financial statements fairly present the results of its operations and financial condition for the periods and dates indicated with such certification to be free of exceptions and qualifications as to the scope of the audit or as to the going concern nature of the business.

(B)

Quarterly Financial Statements.  As soon as available, and in any event within 45 days after each of the first three fiscal quarters of each fiscal year during the Term of this Agreement, the unaudited balance sheet of Guarantor as of the end of such fiscal quarter, the unaudited statement of income and retained earnings of Guarantor and the unaudited statement of cash flows of Guarantor for the portion of the fiscal year ended with the last day of such quarter, all in reasonable detail and stating in comparative form the respective figures for the corresponding date and period in the previous fiscal year, accompanied by a certificate of a member of Senior Management (which certificate shall be without personal liability to such officer) stating that such financial statements have been prepared in accordance with GAAP, consistently applied, and fairly present th e results of its operations and financial condition for the periods and dates indicated subject to year end adjustments in accordance with GAAP.

(iii)

[Left blank intentionally]

(iv)

Other Reports.  Promptly upon receipt thereof, all schedules, financial statements or other similar reports delivered by the Guarantor pursuant to the Loan Documents or reasonably requested by the Lender with respect to the Guarantor’s business affairs or condition (financial or otherwise) subject to the confidentiality covenant set forth below.  

After the providing by Guarantor of any statement, report or other information on a collective basis to Standard & Poor’s, Moody’s Investors Service, Duff & Phelps, Fitch and/or any other rating agency, and/or after providing any statement, report or other information on a collective basis to the banks or other institutions providing unsecured lines of credit and loans to Guarantor, Guarantor shall promptly furnish such statement, report or other information to Lender.

As used in this Paragraph (iv), the phrase “on a collective basis” means as provided to a group as a whole as opposed to an individual basis, e.g.., providing information to a rating agency or to a bank to respond to a particular request of such rating agency or bank.

The Lender agrees to treat all Information received by it (I) under this Paragraph (iv) as confidential and (II) which Guarantor requests in writing to the Persons at the Lender who receive any Information regarding Guarantor that such information be treated as confidential; provided, however, that such Information may be disclosed (A) as required by law, (B) to officers, directors, employees, agents, partners, attorneys, auditors, accountants, engineers and other consultants of the Lender, or its successors or assigns, who need to know such Information, provided such Persons are instructed to treat such Information confidentially, (C) by the Lender to any successor or assign of such Person, (D) to any federal or state regulatory authority having jurisdiction over the Lender, or its successors or assigns, (E) to any other Person to which such delivery or

8

disclosure may be necessary or appropriate (w) in compliance with any law, rule, regulation or order applicable to the Lender, or its successors or assigns, (x) in response to any subpoena or other legal process or information investigative demand, or (y) in connection with any litigation to which the Lender, or its successors or assigns, is a party.  Guarantor agrees that Information subject to this Paragraph (iv) does not include information which (I) was publicly known, or otherwise known to the Lender, or its successors or assigns, at the time of disclosure, (II) subsequently becomes publicly known through no act of or omission by the Lender or its successors or assigns, other than through disclosure by Guarantor or by any other Person in violation of this Paragraph (iv) or  any other confidentiality arrangement and the Lender, or its successors or assigns, has knowledge of suc h violation; provided, however, that in the event the disclosing Person shall reasonably endeavor to notify Guarantor thereof as soon as possible after such disclosure has been made and Guarantor shall be afford an opportunity to seek protective orders, or such other confidential treatment of such Information as Guarantor may deem reasonable.  

(v)

Certification.  All certifications required to be delivered pursuant to this Section 8(b) shall run directly to and be for the benefit of Lender and Fannie Mae.

(c)

Maintain Licenses.  Guarantor shall procure and maintain in full force and effect all licenses, Permits, charters and registrations which are material to the conduct of its business and shall abide by and satisfy all terms and conditions of all such licenses, Permits, charters and registrations.

(d)

Access to Records; Discussions With Senior Management.  To the extent permitted by law, Guarantor shall permit the Lender to:

(i)

inspect Guarantor’s books and records related to the Borrower and the Mortgaged Property;

(ii)

discuss Guarantor’s affairs, finances and accounts with Guarantor’s Senior Management or, provided that Senior Management of Guarantor has been given the opportunity by Lender to be a party to such discussions, property managers and independent public accountants;

(iii)

provided that Senior Management of Guarantor has been given the opportunity by Lender to be a party to such discussions, discuss the Mortgaged Properties’ conditions, operations or maintenance with the managers of such Mortgaged Properties and the officers and employees of Guarantor; and

(iv)

receive any other information that the Lender deems reasonably necessary or relevant in connection with the Guaranty, any Loan Document or the Guaranteed Obligations.

Notwithstanding the foregoing, prior to an Event of Default or Potential Event of Default, all inspections shall be conducted at reasonable times during normal business hours and upon reasonable notice to the Guarantor.

(e)

Inform the Lender of Material Events.  Guarantor shall promptly, but in any event within five (5) Business Days, inform the Lender in writing of any of the following (and shall deliver to the Lender copies of any related written communications, complaints, orders, judgments and other documents relating to the following) of which Guarantor has actual knowledge:

9

(i)

Defaults.  The occurrence of any Event of Default or any Potential Event of Default under any Loan Document;

(ii)

Bankruptcy Proceedings.  The commencement of any proceedings by or against Guarantor under any applicable bankruptcy, reorganization, liquidation, insolvency or other similar law now or hereafter in effect or of any proceeding in which a receiver, liquidator, trustee or other similar official is sought to be appointed for it;

(iii)

Accounting Changes.  Any material change in Guarantor’s accounting policies or financial reporting practices; and

(iv)

Restructuring of Guarantor.  Any restructuring or reorganization of any Guarantor.

(f)

ERISA.  Guarantor shall at all times remain in compliance in all material respects with all applicable provisions of ERISA and similar requirements of the PBGC.

(g)

Further Assurances.  Provided they do not materially increase the Guaranteed Obligations of Guarantor, Guarantor, at the request of the Lender, but without incurring any liability beyond the Guaranteed Obligations, shall execute and deliver and, if necessary, file or record such statements, documents, agreements, UCC financing and continuation statements and such other instruments and take such further action as the Lender from time to time may request as reasonably necessary, desirable or proper to carry out more effectively the purposes of this Guaranty or any of the other Loan Documents or to subject the Collateral to the lien and security interests of the Loan Documents or to evidence, perfect or otherwise implement, to assure the lien and security interests intended by the terms of the Loan Documents or in order to exercise or enforce its rights under the Loan Documents.

(h)

Monitoring Compliance.  Upon the request of the Lender, but without incurring any liability beyond the Guaranteed Obligations, from time to time, Guarantor shall promptly provide to the Lender such documents, certificates and other information as may be deemed reasonably necessary to enable the Lender to perform its functions under the Servicing Agreement as the same relates to the Guarantor.

Section 9.

Negative Covenants of Guarantor.

(a) Liquidation. Guarantor shall not dissolve or liquidate in whole or in part.

(b) Principal Place of Business. Guarantor shall not change its principal place of business or the location of its books and records without first giving 10 days' prior written notice to the Lender.

Section 10. Financial Covenants. Guarantor agrees and covenants with the Lender that, at all times during the Term of this Guaranty, the Net Worth of the REIT, the Guarantor and the Subsidiaries on a consolidated basis shall not be below $1,500,000,000.

Section 11.

Expenses.  Guarantor agrees to pay all reasonable costs and out-of-pocket expenses, including court costs and expenses and the reasonable fees and disbursements of legal counsel, incurred by or on behalf of Lender in connection with the enforcement of Guarantor’s obligations under this Guaranty or the protection of Lender’s rights under this Guaranty. The covenants contained in this Section shall survive the payment of the Guaranteed Obligations.

Section 12.

Condition of Borrower.  Guarantor is fully aware of the financial condition of Borrower and is executing and delivering this Guaranty based solely upon

10

Guarantor’s own independent investigation of all matters pertinent hereto and is not relying in any manner upon any representation or statement made by Lender. Guarantor represents and warrants that Guarantor is in a position to obtain, and Guarantor hereby assumes full responsibility for obtaining, any additional information concerning Borrower’s financial condition and any other matters pertinent hereto as Guarantor may desire and Guarantor is not relying upon or expecting Lender to furnish to Guarantor any information now or hereafter in Lender’s possession concerning the same or any other matter. By executing this Guaranty, Guarantor knowingly accepts the full range of risks encompassed within a contract of this type, which risks Guarantor acknowledges.

Section 13.

Further Assurances.  Guarantor agrees at any time and from time to time upon request by Lender to take, or cause to be taken, any action and to execute and deliver any additional documents which, in the reasonable opinion of Lender, may be necessary in order to assure to Lender the full benefits of this Guaranty, so long as any such action does not materially increase Guarantor’s Guaranteed Obligations hereunder or materially decrease its rights hereunder.

Section 14.

Subordination.  Guarantor hereby irrevocably and unconditionally agrees that any claims, direct or indirect, Guarantor may have by subrogation or other form of reimbursement, against Borrower or to any security or any interest therein, by virtue of this Guaranty or as a consequence of any payment made by Guarantor pursuant to this Guaranty, shall be fully subordinated in time and right of payment to the payment in full of the Guaranteed Obligations and all other obligations of Guarantor to Lender under this Guaranty.

Section 15.

No Subrogation.  Guarantor shall not have any right of subrogation against Borrower by reason of any payment by Guarantor under this Guaranty until such time as all of the Guaranteed Obligations have been satisfied in full. Nothing in the foregoing shall affect any claim which any Guarantor has against Borrower under the terms of the Organizational Documents of the Borrower.

Section 16.

Insolvency and Liability of Borrower.  So long as any of the Guaranteed Obligations is unpaid and this Guaranty is in effect, and to the extent not prohibited by the applicable bankruptcy court, Guarantor agrees to file all claims against Borrower in any bankruptcy or other proceeding in which the filing of claims is required by law in connection with indebtedness owed by Borrower to Guarantor and to assign to Lender all rights of Guarantor thereunder up to the lesser of (i) the amount of such indebtedness or (ii) the amount of the Guaranteed Obligations.  In all such cases the Person or Persons authorized to pay such claims shall pay to Lender the full amount thereof to the full extent necessary to pay the Guaranteed Obligations, and Guarantor hereby assigns to Lender all of Guarantor’s rights to all such payments to which Guarantor would otherwise be entitled. Notw ithstanding the foregoing, and except to the extent that any sums owed by Borrower to Lender under the Loan Documents shall have been fully satisfied thereby, the liability of Guarantor hereunder shall in no way be affected by

(a)

the release or discharge of Borrower in any creditors’, receivership, bankruptcy or other proceedings; or

(b)

the impairment, limitation or modification of the liability of Borrower or the estate of Borrower in bankruptcy resulting from the operation of any present or future provisions of the Bankruptcy Code or other statute or from the decision in any court.

Section 17.

Preferences, Fraudulent Conveyances, Etc.  If Lender is required to refund, or voluntarily refunds, any payment received from Borrower because such payment is or may be avoided, invalidated, declared fraudulent, set aside or determined to be void or voidable as a preference, fraudulent conveyance, impermissible setoff or a diversion of trust funds under

11

the bankruptcy laws or for any similar reason, including, without limitation, any judgment, order or decree of any court or administrative body having jurisdiction over Lender or any of its property, or any settlement or compromise of any claim effected by Lender with Borrower or other claimant (a “Rescinded Payment”), then Guarantor’s liability to Lender shall continue in full force and effect, or Guarantor’s liability to Lender shall be reinstated, as the case may be, with the same effect and to the same extent as if the Rescinded Payment had not been received by Lender (but only to the extent such Rescinded Payment was part of the Guaranteed Obligations hereunder), notwithstanding the cancellation or termination of any Note or any of the other Loan Documents. In addition, Guarantor shall pay, or reimburse Lender for, all expenses (including all reasona ble attorneys’ fees, court costs and related disbursements) incurred by Lender in the defense of any claim that a payment received by Lender in respect of all or any part of the Guaranteed Obligations from Guarantor must be refunded. The provisions of this Section shall survive the termination of this Guaranty and any satisfaction and discharge of Borrower by virtue of any payment, court order or any federal or state law.

Section 18.

Waiver.  Neither this Guaranty nor any term hereof may be changed, waived, discharged or terminated except by an instrument in writing signed by Lender and Guarantor expressly referring to this Guaranty and to the provisions so changed or limited. No such waiver shall extend to or affect any obligation not expressly waived or impair any right consequent thereon. No course of dealing or delay or omission on the part of Lender in exercising any right under this Guaranty shall operate as a waiver thereof or otherwise by prejudice thereto.

Section 19.

Notices.  All notices or other communications hereunder shall be sufficiently given and shall be deemed given when sent in the manner prescribed by the Loan Agreement addressed to the parties as follows:

As to the Guarantor:

AIMCO

Stanford Place 3

4582 South Ulster St. Parkway

Suite 1100

Denver, Colorado  80237

Attn:  Senior Vice President-Debt & Securities

with a copy to:

Ballard Spahr Andrews & Ingersoll, LLP

Seventeenth Street Plaza Building

1225 17^th Street, Suite 2300

Denver, Colorado 80202

Attn:  Gwendolyn C. Allen, Esquire

If to Lender or Fannie Mae:

As provided in the Loan Agreement.

Section 20.

Assignability by Lender.  Lender may, without notice to Guarantor, assign or transfer the Loans and the Loan Documents, in whole or in part. In such event, each and every immediate and successive assignee, transferee or holder of all or any part of the Loans and the Loan Documents shall have the right to enforce this Guaranty, by legal action or otherwise, as fully as if such assignee, transferee, or holder were by name specifically given such right and power in this Guaranty. Lender shall have an unimpaired right to enforce this Guaranty for its benefit as to so much of the Loans and the Loan Documents as Lender has not sold, assigned or transferred.

12

Section 21.

Guarantor Bound by Judgment Against Borrower.  Guarantor shall be conclusively bound, in any jurisdiction, by the judgment in any action by Lender against Borrower in connection with the Loan Documents (wherever instituted) as if Guarantor were a party to such action even if not so joined as a party.

Section 22.

Governing Law.  The provisions of Section 11.06 of the Loan Agreement (entitled Choice of Law; Consent to Jurisdiction; Waiver of Jury Trial) are hereby incorporated into this Agreement by this reference to the fullest extent as if the text of such Section were set forth in its entirety herein.

Section 23.

Invalid Provisions.  If any provision of this Guaranty or the application thereof to Guarantor or any circumstance in any jurisdiction whose laws govern this Guaranty shall, to any extent, be invalid or unenforceable under any applicable statute, regulation or rule of law, then such provision shall be deemed inoperative to the extent of such invalidity or unenforceability and shall be deemed modified to conform to such statute, regulation or rule or law. The remainder of this Guaranty and the application of any such invalid or unenforceable provision to parties, jurisdictions or circumstances other than those to whom or to which it is held invalid or unenforceable, shall not be affected by such invalidity or unenforceability nor shall such invalidity or unenforceability affect the validity or enforceability of any other provision of this Guaranty.

Section 24.

General Provisions.  This Guaranty shall be binding upon the respective successors and assigns of Guarantor, and shall inure to the benefit of Lender and its successors and assigns, including, without limitation, each successive holder of the Note. The descriptive headings of the Sections of the Guaranty have been inserted herein for convenience of reference only and shall not define or limit the provisions hereof.

ATTACHED EXHIBITS.  The following Exhibits are attached to this Instrument:

X Exhibit A Modifications to Guaranty

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]

13

IN WITNESS WHEREOF, Guarantor has signed this Guaranty under seal as of the day and year first above written.

AIMCO PROPERTIES, L.P., a Delaware limited partnership

By:

AIMCO-GP, Inc., a Delaware corporation, its general partner

By: /s/Patti K. Fielding

Patti K. Fielding

Executive Vice President and Treasurer

14

EXHIBIT A

MODIFICATIONS TO GUARANTY

The following modifications are hereby made to the text of the Guaranty that precedes this Exhibit:

1.

A new Section 25 is hereby added as follows:

“Section 25.

Additional Guaranty Relating to Bankruptcy.  

(a)

Notwithstanding any limitation on liability provided for elsewhere in this Guaranty, Guarantor hereby absolutely, unconditionally and irrevocably guarantees to Lender the full and prompt payment when due, whether at the maturity date or earlier, by reason of acceleration or otherwise, and at all times thereafter, the entire Indebtedness, in the event that:

(i)

Borrower voluntarily files for bankruptcy protection under the United States Bankruptcy Code; or

(ii)

Borrower voluntarily becomes subject to any reorganization, receivership, insolvency proceeding, or other similar proceeding pursuant to any other federal or state law affecting debtor and creditor rights; or

(iii)

an order of relief is entered against Borrower pursuant to the United States Bankruptcy Code or other federal or state law affecting debtor and creditor rights in any involuntary bankruptcy proceeding initiated or joined in by a "Related Party."  

(b)

For purposes of this Section, the term "Related Party" means:

(i)

Borrower or Guarantor; and

(ii)

any person or entity that holds, directly or indirectly, any ownership interest in or right to manage Borrower or Guarantor, including without limitation, any shareholder, member or partner of Borrower or Guarantor; and

(iii)

any person or entity in which any ownership interest (direct or indirect) or right to manage is held by Borrower, Guarantor or any partner, shareholder or member of, or any other person or entity holding an interest in, Borrower or Guarantor; and

(iv)

any other creditor of Borrower that is related by blood, marriage or adoption to Borrower, Guarantor or any partner, shareholder or member of, or any

PAGE A-1

other person or entity holding an interest in, Borrower or Guarantor.  

If Borrower, Guarantor or any Related Party has solicited creditors to initiate or participate in any proceeding referred to in this Section, regardless of whether any of the creditors solicited actually initiates or participates in the proceeding, then such proceeding shall be considered as having been initiated by a Related Party.”

_____________

INITIALS

PAGE A-2

EX-10

EXHIBIT 10.49

Prepared by, and after recording

return to:

Brian J. Iwashyna, Esquire

Troutman Sanders LLP

P.O. Box 1122

Richmond, Virginia  23218-1122

MULTIFAMILY MORTGAGE,

ASSIGNMENT OF RENTS

AND SECURITY AGREEMENT

(INDIANA)

TABLE OF CONTENTS

PAGE

1.

DEFINITIONS

2.

UNIFORM COMMERCIAL CODE SECURITY AGREEMENT

3.

ASSIGNMENT OF RENTS; APPOINTMENT OF RECEIVER; LENDER IN POSSESSION.

4.

ASSIGNMENT OF LEASES; LEASES AFFECTING THE MORTGAGED PROPERTY.

5.

PAYMENT OF INDEBTEDNESS; PERFORMANCE UNDER LOAN DOCUMENTS; PREPAYMENT PREMIUM  

6.

EXCULPATION

7.

DEPOSITS FOR TAXES, INSURANCE AND OTHER CHARGES

8.

COLLATERAL AGREEMENTS

9.

APPLICATION OF PAYMENTS

10.

COMPLIANCE WITH LAWS

11.

USE OF PROPERTY

12.

PROTECTION OF LENDER'S SECURITY

13.

INSPECTION

14.

BOOKS AND RECORDS; FINANCIAL REPORTING

15.

TAXES; OPERATING EXPENSES

16.

LIENS; ENCUMBRANCES

17.

PRESERVATION, MANAGEMENT AND MAINTENANCE OF MORTGAGED PROPERTY.

18.

ENVIRONMENTAL HAZARDS.

19.

PROPERTY AND LIABILITY INSURANCE.

20.

CONDEMNATION.

21.

TRANSFERS OF THE MORTGAGED PROPERTY OR INTERESTS IN BORROWER.

22.

EVENTS OF DEFAULT

23.

REMEDIES CUMULATIVE

24.

FORBEARANCE

25.

LOAN CHARGES

26.

WAIVER OF STATUTE OF LIMITATIONS.

27.

WAIVER OF MARSHALLING

28.

FURTHER ASSURANCES

29.

ESTOPPEL CERTIFICATE

30.

GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE

31.

NOTICE

32.

SALE OF NOTE; CHANGE IN SERVICER

33.

SINGLE ASSET BORROWER

34.

SUCCESSORS AND ASSIGNS BOUND

35.

JOINT AND SEVERAL LIABILITY

36.

RELATIONSHIP OF PARTIES; NO THIRD PARTY BENEFICIARY

37.

SEVERABILITY; AMENDMENTS

38.

CONSTRUCTION

39.

LOAN SERVICING

40.

DISCLOSURE OF INFORMATION

41.

NO CHANGE IN FACTS OR CIRCUMSTANCES

42.

SUBROGATION

43.

ACCELERATION; REMEDIES

44.

PREPARATION AND FILING OF FINANCING STATEMENTS

45.

RELEASE

46.

WAIVER OF VALUATION AND APPRAISEMENT

47.

WAIVER OF TRIAL BY JURY

Chappelle Le Grande

MULTIFAMILY MORTGAGE,

ASSIGNMENT OF RENTS

AND SECURITY AGREEMENT

THIS MULTIFAMILY MORTGAGE, ASSIGNMENT OF RENTS AND SECURITY AGREEMENT (the “Instrument”) is dated as of the 18^th day of January, 2007, between VMS NATIONAL PROPERTIES, a joint venture general partnership organized and existing under the laws of Illinois, whose address is c/o AIMCO, Stanford Place 3, 4582 South Ulster Street Parkway, Suite 1100, Denver, Colorado 80237, as mortgagor (“Borrower”), and CAPMARK FINANCE INC., a corporation organized and existing under the laws of California, whose address is 116 Welsh Road, Horsham, Pennsylvania 19044, Attn: Servicing-Executive Vice President, as mortgagee (“Lender”).

Borrower is indebted to Lender in the principal amount of $3,204,772.00, as evidenced by Borrower’s Multifamily Note payable to Lender dated as of the date of this Instrument, and maturing as set forth in the Loan Agreement.

TO SECURE TO LENDER the repayment of the Indebtedness, and all renewals, extensions and modifications of the Indebtedness, and the performance of the covenants and agreements of Borrower contained in the Loan Documents, Borrower mortgages, warrants, grants, conveys and assigns to Lender the Mortgaged Property, including the Land located in Lake County, State of Indiana and described in Exhibit A attached to this Instrument.

Borrower represents and warrants that Borrower is lawfully seized of the Mortgaged Property and has the right, power and authority to mortgage, grant, convey and assign the Mortgaged Property, and that the Mortgaged Property is unencumbered.  Borrower covenants that Borrower will warrant and defend generally the title to the Mortgaged Property against all claims and demands, subject to any easements and restrictions listed in a schedule of exceptions to coverage in any title insurance policy issued to Lender contemporaneously with the execution and recordation of this Instrument and insuring Lender's interest in the Mortgaged Property.

Covenants.  Borrower and Lender covenant and agree as follows:

1.

1. DEFINITIONS. The following terms, when used in this Instrument (including when used in the above recitals), shall have the following meanings:

(a)

(a) "Borrower" means all persons or entities identified as "Borrower" in the first paragraph of this Instrument, together with their successors and assigns.

(b)

(b) "Collateral Agreement" means any separate agreement between Borrower and Lender for the purpose of establishing replacement reserves for the Mortgaged Property, establishing a fund to assure completion of repairs or improvements specified in that agreement, or assuring reduction of the outstanding principal balance of the Indebtedness if the occupancy of or income from the Mortgaged Property does not increase to a level specified in that agreement, or any other agreement or agreements between Borrower and Lender which provide for the establishment of any other fund, reserve or account.

(c)

(c) "Environmental Permit" means any permit, license, or other authorization issued under any Hazardous Materials Law with respect to any activities or businesses conducted on or in relation to the Mortgaged Property.

(d)

(d) "Event of Default" means the occurrence of any event listed in Section 22.

(e)

(e) "Fixtures" means all property which is so attached to the Land or the Improvements as to constitute a fixture under applicable law, including: machinery, equipment, engines, boilers, incinerators, installed building materials; systems and equipment for the purpose of supplying or distributing heating, cooling, electricity, gas, water, air, or light; antennas, cable, wiring and conduits used in connection with radio, television, security, fire prevention, or fire detection or otherwise used to carry electronic signals; telephone systems and equipment; elevators and related machinery and equipment; fire detection, prevention and extinguishing systems and apparatus; security and access control systems and apparatus; plumbing systems; water heaters, ranges, stoves, microwave ovens, refrigerators, dishwashers, garbage disposers, washers, dryers and other appliances; light fixtures, awnings, storm windows and storm doors; pictures, screens, blinds, shades, curtains and curtain rods; mirrors; c abinets, paneling, rugs and floor and wall coverings; fences, trees and plants; swimming pools; and exercise equipment.

(f)

(f) "Governmental Authority" means any board, commission, department or body of any municipal, county, state or federal governmental unit, or any subdivision of any of them, that has or acquires jurisdiction over the Mortgaged Property or the use, operation or improvement of the Mortgaged Property.

(g)

(g) "Hazardous Materials" means petroleum and petroleum products and compounds containing them, including gasoline, diesel fuel and oil; explosives; flammable materials; radioactive materials; polychlorinated biphenyls ("PCBs") and compounds containing them; lead and lead-based paint; asbestos or asbestos-containing materials in any form that is or could become friable; underground or above-ground storage tanks, whether empty or containing any substance; any substance the presence of which on the Mortgaged Property is prohibited by any federal, state or local authority; any substance that requires special handling; and any other material or substance now or in the future defined as a "hazardous substance," "hazardous material," "hazardous waste," "toxic substance," "toxic pollutant," "contaminant," or "pollutant" within the meaning of any Hazardous Materials Law.

(h)

(h) "Hazardous Materials Laws" means all federal, state, and local laws, ordinances and regulations and standards, rules, policies and other governmental requirements, administrative rulings and court judgments and decrees in effect now or in the future and including all amendments, that relate to Hazardous Materials and apply to Borrower or to the Mortgaged Property. Hazardous Materials Laws include, but are not limited to, the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., the Toxic Substance Control Act, 15 U.S.C. Section 2601, et seq., the Clean Water Act, 33 U.S.C. Section 1251, et seq., and the Hazardous Materials Transportation Act, 49 U.S.C. Section 5101, et seq., and their state analogs.

(i)

(i) "Impositions" and "Imposition Deposits" are defined in Section 7(a).

(j)

(j) "Improvements" means the buildings, structures, improvements, and alterations now constructed or at any time in the future constructed or placed upon the Land, including any future replacements and additions.

(k)

(k) "Indebtedness" means the principal of, interest on, and all other amounts due at any time under, the Note, this Instrument or any other Loan Document, including prepayment premiums, late charges, default interest, and advances as provided in Section 12 to protect the security of this Instrument.

(l)

(l) [Intentionally omitted]

(m)

(m) "Key Principal" means the natural person(s) or entity identified as such at the foot of this Instrument, and any person or entity who becomes a Key Principal after the date of this Instrument and is identified as such in an amendment or supplement to this Instrument.

(n)

(n) "Land" means the land described in Exhibit A.

(o)

(o) "Leases" means all present and future leases, subleases, licenses, concessions or grants or other possessory interests now or hereafter in force, whether oral or written, covering or affecting the Mortgaged Property, or any portion of the Mortgaged Property (including proprietary leases or occupancy agreements if Borrower is a cooperative housing corporation), and all modifications, extensions or renewals.

(p)

(p) "Lender" means the entity identified as "Lender" in the first paragraph of this Instrument and its successors and assigns, or any subsequent holder of the Note.

(q)

(q) "Loan Documents" means the Note, this Instrument, all guaranties, all indemnity agreements, all Collateral Agreements, O&M Programs, and any other documents now or in the future executed by Borrower, Key Principal, any guarantor or any other person in connection with the loan evidenced by the Note, as such documents may be amended from time to time.

(r)

(r) "Loan Servicer" means the entity that from time to time is designated by Lender to collect payments and deposits and receive notices under the Note, this Instrument and any other Loan Document, and otherwise to service the loan evidenced by the Note for the benefit of Lender.  Unless Borrower receives notice to the contrary, the Loan Servicer is the entity identified as "Lender" in the first paragraph of this Instrument.

(s)

(s) "Mortgaged Property" means all of Borrower's present and future right, title and interest in and to all of the following:

(1)

the Land;

(2)

the Improvements;

(3)

the Fixtures;

(4)

the Personalty;

(5)

all current and future rights, including air rights, development rights, zoning rights and other similar rights or interests, easements, tenements, rights-of-way, strips and gores of land, streets, alleys, roads, sewer rights, waters, watercourses, and appurtenances related to or benefitting the Land or the Improvements, or both, and all rights-of-way, streets, alleys and roads which may have been or may in the future be vacated;

(6)

all proceeds paid or to be paid by any insurer of the Land, the Improvements, the Fixtures, the Personalty or any other part of the Mortgaged Property, whether or not Borrower obtained the insurance pursuant to Lender’s requirement;

(7)

all awards, payments and other compensation made or to be made by any municipal, state or federal authority with respect to the Land, the Improvements, the Fixtures, the Personalty or any other part of the Mortgaged Property, including any awards or settlements resulting from condemnation proceedings or the total or partial taking of the Land, the

Improvements, the Fixtures, the Personalty or any other part of the Mortgaged Property under the power of eminent domain or otherwise and including any conveyance in lieu thereof;

(8)

all contracts, options and other agreements for the sale of the Land, the Improvements, the Fixtures, the Personalty or any other part of the Mortgaged Property entered into by Borrower now or in the future, including cash or securities deposited to secure performance by parties of their obligations;

(9)

all proceeds from the conversion, voluntary or involuntary, of any of the above into cash or liquidated claims, and the right to collect such proceeds;

(10)

all Rents and Leases;

(11)

all earnings, royalties, accounts receivable, issues and profits from the Land, the Improvements or any other part of the Mortgaged Property, and all undisbursed proceeds of the loan secured by this Instrument and, if Borrower is a cooperative housing corporation, maintenance charges or assessments payable by shareholders or residents;

(12)

all Imposition Deposits;

(13)

all refunds or rebates of Impositions by any municipal, state or federal authority or insurance company (other than refunds applicable to periods before the real property tax year in which this Instrument is dated);

(14)

all tenant security deposits which have not been forfeited by any tenant under any Lease; and

(15)

all names under or by which any of the above Mortgaged Property may be operated or known, and all trademarks, trade names, and goodwill relating to any of the Mortgaged Property.

(t)

(t) "Note" means the Multifamily Note described on page 1 of this Instrument, including the Acknowledgment and Agreement of Key Principal to Personal Liability for Exceptions to Non-Recourse Liability (if any), and all schedules, riders, allonges and addenda, as such Multifamily Note may be amended from time to time.

(u)

(u) "O&M Program" is defined in Section 18(a).

(v)

(v) "Personalty" means all equipment, inventory, general intangibles which are used now or in the future in connection with the ownership, management or operation of the Land or the Improvements or are located on the Land or in the Improvements, including furniture, furnishings, machinery, building materials, appliances, goods, supplies, tools, books, records (whether in written or electronic form), computer equipment (hardware and software) and other tangible personal property (other than Fixtures) which are used now or in the future in connection with the ownership, management or operation of the Land or the Improvements or are located on the Land or in the Improvements, and any operating agreements relating to the Land or the Improvements, and any surveys, plans and specifications and contracts for architectural, engineering and construction services relating to the Land or the Improvements and all other intangible property and rights relating to the operation of, or used in connection wi th, the Land or the Improvements, including all governmental permits relating to any activities on the Land.

(w)

(w) "Property Jurisdiction" is defined in Section 30(a).

(x)

(x) "Rents" means all rents (whether from residential or non-residential space), revenues and other income of the Land or the Improvements, including subsidy payments received from any sources (including, but not limited to payments under any Housing Assistance Payments Contract) parking fees, laundry and vending machine income and fees and charges for food, health care and other services provided at the Mortgaged Property, whether now due, past due, or to become due, and deposits forfeited by tenants.

(y)

(y) "Taxes" means all taxes, assessments, vault rentals and other charges, if any, general, special or otherwise, including all assessments for schools, public betterments and general or local improvements, which are levied, assessed or imposed by any public authority or quasi-public authority, and which, if not paid, will become a lien, on the Land or the Improvements.

(z)

(z) "Transfer" means (A) a sale, assignment, transfer or other disposition (whether voluntary, involuntary or by operation of law); (B) the granting, creating or attachment of a lien, encumbrance or security interest (whether voluntary, involuntary or by operation of law); (C) the issuance or other creation of an ownership interest in a legal entity, including a partnership interest, interest in a limited liability company or corporate stock; (D) the withdrawal, retirement, removal or involuntary resignation of a partner in a partnership or a member or manager in a limited liability company; or (E) the merger, dissolution, liquidation, or consolidation of a legal entity.  "Transfer" does not include (i) a conveyance of the Mortgaged Property at a judicial or non-judicial foreclosure sale under this Instrument or (ii) the Mortgaged Property becoming part of a bankruptcy estate by operation of law under the United States Bankruptcy Code.  For purposes of defining the term & quot;Transfer," the term "partnership" shall mean a general partnership, a limited partnership, a joint venture and a limited liability partnership, and the term "partner" shall mean a general partner, a limited partner and a joint venturer.

2.

2. UNIFORM COMMERCIAL CODE SECURITY AGREEMENT.  This Instrument is also a security agreement under the Uniform Commercial Code for any of the Mortgaged Property which, under applicable law, may be subject to a security interest under the Uniform Commercial Code, whether acquired now or in the future, and all products and cash and non-cash proceeds thereof (collectively, "UCC Collateral"), and Borrower hereby grants to Lender a security interest in the UCC Collateral.  Borrower hereby authorizes Lender to file financing statements, continuation statements and financing statement amendments, in such form as Lender may require to perfect or continue the perfection of this security interest and Borrower agrees, if Lender so requests, to execute and deliver to Lender such financing statements, continuation statements and amendments.  Borrower shall pay all filing costs and all costs and expenses of any record searches for financing statements that Le nder may require.  Without the prior written consent of Lender, Borrower shall not create or permit to exist any other lien or security interest in any of the UCC Collateral.  If an Event of Default has occurred and is continuing, Lender shall have the remedies of a secured party under the Uniform Commercial Code, in addition to all remedies provided by this Instrument or existing under applicable law.  In exercising any remedies, Lender may exercise its remedies against the UCC Collateral separately or together, and in any order, without in any way affecting the availability of Lender's other remedies.  This Instrument constitutes a financing statement with respect to any part of the Mortgaged Property which is or may become a Fixture.

3.

3. ASSIGNMENT OF RENTS; APPOINTMENT OF RECEIVER; LENDER IN POSSESSION.

(a)

(a) As part of the consideration for the Indebtedness, Borrower absolutely and unconditionally assigns and transfers to Lender all Rents.  It is the intention of Borrower to establish a present, absolute and irrevocable transfer and assignment to Lender of all Rents and to authorize and empower Lender to collect and receive all Rents without the necessity of further action on the part of Borrower.  Promptly upon request by Lender, Borrower agrees to execute and deliver such further assignments as Lender may from time to time require.  Borrower and Lender intend this assignment of Rents to be immediately effective and to constitute an absolute present assignment and not an assignment for additional security only.  For purposes of giving effect to this absolute assignment of Rents, and for no other purpose, Rents shall not be deemed to be a part of the "Mortgaged Property," as that term is defined in Section 1(s).  However, if this present, absolute and unconditional assignme nt of Rents is not enforceable by its terms under the laws of the Property Jurisdiction, then the Rents shall be included as a part of the Mortgaged Property and it is the intention of the Borrower that in this circumstance this Instrument create and perfect a lien on Rents in favor of Lender, which lien shall be effective as of the date of this Instrument.

(b)

(b) After the occurrence of an Event of Default, Borrower authorizes Lender to collect, sue for and compromise Rents and directs each tenant of the Mortgaged Property to pay all Rents to, or as directed by, Lender, and Borrower shall, upon Borrower’s receipt of any Rents from any sources (including, but not limited to subsidy payments under any Housing Assistance Payments Contract), pay the total amount of such receipts to the Lender.  However, until the occurrence of an Event of Default, Lender hereby grants to Borrower a revocable license to collect and receive all Rents, to hold all Rents in trust for the benefit of Lender and to apply all Rents to pay the installments of interest and principal then due and payable under the Note and the other amounts then due and payable under the other Loan Documents, including Imposition Deposits, and to pay the current costs and expenses of managing, operating and maintaining the Mortgaged Property, including utilities, Taxes and insurance premiums (to the e xtent not included in Imposition Deposits), tenant improvements and other capital expenditures.  So long as no Event of Default has occurred and is continuing, the Rents remaining after application pursuant to the preceding sentence may be retained by Borrower free and clear of, and released from, Lender's rights with respect to Rents under this Instrument.  From and after the occurrence of an Event of Default, and without the necessity of Lender entering upon and taking and maintaining control of the Mortgaged Property directly, or by a receiver, Borrower’s license to collect Rents shall automatically terminate and Lender shall without notice be entitled to all Rents as they become due and payable, including Rents then due and unpaid.  Borrower shall pay to Lender upon demand all Rents to which Lender is entitled.  At any time on or after the date of Lender’s demand for Rents, Lender may give, and Borrower hereby irrevocably authorizes Lender to give, notice to all tenants of t he Mortgaged Property instructing them to pay all Rents to Lender, no tenant shall be obligated to inquire further as to the occurrence or continuance of an Event of Default, and no tenant shall be obligated to pay to Borrower any amounts which are actually paid to Lender in response to such a notice.  Any such notice by Lender shall be delivered to each tenant personally, by mail or by delivering such demand to each rental unit.  Borrower shall not interfere with and shall cooperate with Lender's collection of such Rents.

(c)

(c) Borrower represents and warrants to Lender that Borrower has not executed any prior assignment of Rents (other than an assignment of Rents securing indebtedness that will be paid off and discharged with the proceeds of the loan evidenced by the Note), that Borrower has not performed, and Borrower covenants and agrees that it will not perform, any acts and has not executed, and shall not execute, any instrument which would prevent Lender from exercising its rights under this Section 3, and that at the time of execution of this Instrument there has been no anticipation or prepayment of any Rents for more than two months prior to the due dates of such Rents.  Borrower shall not collect or accept payment of any Rents more than two months prior to the due dates of such Rents.

(d)

(d) If an Event of Default has occurred and is continuing, Lender may, regardless of the adequacy of Lender's security or the solvency of Borrower and even in the absence of waste, enter upon and take and maintain full control of the Mortgaged Property in order to perform all acts that Lender in its discretion determines to be necessary or desirable for the operation and maintenance of the Mortgaged Property, including the execution, cancellation or modification of Leases, the collection of all Rents, the making of repairs to the Mortgaged Property and the execution or termination of contracts providing for the management, operation or maintenance of the Mortgaged Property, for the purposes of enforcing the assignment of Rents pursuant to Section 3(a), protecting the Mortgaged Property or the security of this Instrument, or for such other purposes as Lender in its discretion may deem necessary or desirable.  Alternatively, if an Event of Default has occurred and is continuing, regardless of the adequacy of Lender's security, without regard to Borrower’s solvency and without the necessity of giving prior notice (oral or written) to Borrower, Lender may apply to any court having jurisdiction for the appointment of a receiver for the Mortgaged Property to take any or all of the actions set forth in the preceding sentence.  If Lender elects to seek the appointment of a receiver for the Mortgaged Property at any time after an Event of Default has occurred and is continuing, Borrower, by its execution of this Instrument, expressly consents to the appointment of such receiver, including the appointment of a receiver ex parte if permitted by applicable law.  Lender or the receiver, as the case may be, shall be entitled to receive a reasonable fee for managing the Mortgaged Property.  Immediately upon appointment of a receiver or immediately upon the Lender's entering upon and taking possession and control of the Mortgaged Property, Borrower shall surrender possession of the Mortgaged Pro perty to Lender or the receiver, as the case may be, and shall deliver to Lender or the receiver, as the case may be, all documents, records (including records on electronic or magnetic media), accounts, surveys, plans, and specifications relating to the Mortgaged Property and all security deposits and prepaid Rents.  In the event Lender takes possession and control of the Mortgaged Property, Lender may exclude Borrower and its representatives from the Mortgaged Property.  Borrower acknowledges and agrees that the exercise by Lender of any of the rights conferred under this Section 3 shall not be construed to make Lender a mortgagee-in-possession of the Mortgaged Property so long as Lender has not itself entered into actual possession of the Land and Improvements.

(e)

(e) If Lender enters the Mortgaged Property, Lender shall be liable to account only to Borrower and only for those Rents actually received.  Lender shall not be liable to Borrower, anyone claiming under or through Borrower or anyone having an interest in the Mortgaged Property, by reason of any act or omission of Lender under this Section 3, and Borrower hereby releases and discharges Lender from any such liability to the fullest extent permitted by law.

(f)

(f) If the Rents are not sufficient to meet the costs of taking control of and managing the Mortgaged Property and collecting the Rents, any funds expended by Lender for such purposes shall become an additional part of the Indebtedness as provided in Section 12.

(g)

(g) Any entering upon and taking of control of the Mortgaged Property by Lender or the receiver, as the case may be, and any application of Rents as provided in this Instrument shall not cure or waive any Event of Default or invalidate any other right or remedy of Lender under applicable law or provided for in this Instrument.

4.

4. ASSIGNMENT OF LEASES; LEASES AFFECTING THE MORTGAGED PROPERTY.

(a)

(a) As part of the consideration for the Indebtedness, Borrower absolutely and unconditionally assigns and transfers to Lender all of Borrower's right, title and interest in, to and under the Leases, including Borrower's right, power and authority to modify the terms of any such Lease, or extend or terminate any such Lease.  It is the intention of Borrower to establish a present, absolute and irrevocable transfer and assignment to Lender of all of Borrower’s right, title and interest in, to and under the Leases.  Borrower and Lender intend this assignment of the Leases to be immediately effective and to constitute an absolute present assignment and not an assignment for additional security only.  For purposes of giving effect to this absolute assignment of the Leases, and for no other purpose, the Leases shall not be deemed to be a part of the “Mortgaged Property,” as that term is defined in Section 1(s).  However, if this present, absolute and unconditional assignment of t he Leases is not enforceable by its terms under the laws of the Property Jurisdiction, then the Leases shall be included as a part of the Mortgaged Property and it is the intention of the Borrower that in this circumstance this Instrument create and perfect a lien on the Leases in favor of Lender, which lien shall be effective as of the date of this Instrument.

(b)

(b) Until Lender gives notice to Borrower of Lender's exercise of its rights under this Section 4, Borrower shall have all rights, power and authority granted to Borrower under any Lease (except as otherwise limited by this Section or any other provision of this Instrument), including the right, power and authority to modify the terms of any Lease or extend or terminate any Lease.  Upon the occurrence of an Event of Default, the permission given to Borrower pursuant to the preceding sentence to exercise all rights, power and authority under Leases shall automatically terminate.  Borrower shall comply with and observe Borrower's obligations under all Leases, including Borrower's obligations pertaining to the maintenance and disposition of tenant security deposits.

(c)

(c) Borrower acknowledges and agrees that the exercise by Lender, either directly or by a receiver, of any of the rights conferred under this Section 4 shall not be construed to make Lender a mortgagee-in-possession of the Mortgaged Property so long as Lender has not itself entered into actual possession of the Land and the Improvements.  The acceptance by Lender of the assignment of the Leases pursuant to Section 4(a) shall not at any time or in any event obligate Lender to take any action under this Instrument or to expend any money or to incur any expenses.  Lender shall not be liable in any way for any injury or damage to person or property sustained by any person or persons, firm or corporation in or about the Mortgaged Property.  Prior to Lender's actual entry into and taking possession of the Mortgaged Property, Lender shall not (i) be obligated to perform any of the terms, covenants and conditions contained in any Lease (or otherwise have any obligation with respect to any Le ase); (ii) be obligated to appear in or defend any action or proceeding relating to the Lease or the Mortgaged Property; or (iii) be responsible for the operation, control, care, management or repair of the Mortgaged Property or any portion of the Mortgaged Property.  The execution of this Instrument by Borrower shall constitute conclusive evidence that all responsibility for the operation, control, care, management and repair of the Mortgaged Property is and shall be that of Borrower, prior to such actual entry and taking of possession.

(d)

(d) Upon delivery of notice by Lender to Borrower of Lender's exercise of Lender's rights under this Section 4 at any time after the occurrence of an Event of Default, and without the necessity of Lender entering upon and taking and maintaining control of the Mortgaged Property directly, by a receiver, or by any other manner or proceeding permitted by the laws of the Property Jurisdiction, Lender immediately shall have all rights, powers and authority granted to Borrower under any Lease, including the right, power and authority to modify the terms of any such Lease, or extend or terminate any such Lease.

(e)

(e) Borrower shall, promptly upon Lender's request, deliver to Lender an executed copy of each residential Lease then in effect. All Leases for residential dwelling units shall be on forms approved by Lender, shall be for initial terms of at least six months and not more than two years, and shall not include options to purchase.  If customary in the applicable market, residential Leases with terms of less than six months may be permitted with Lender's prior written consent.

(f)

(f) Borrower shall not lease any portion of the Mortgaged Property for non-residential use except with the prior written consent of Lender and Lender's prior written approval of the Lease agreement.  Borrower shall not modify the terms of, or extend or terminate, any Lease for non-residential use (including any Lease in existence on the date of this Instrument) without the prior written consent of Lender.  Borrower shall, without request by Lender, deliver an executed copy of each non-residential Lease to Lender promptly after such Lease is signed.  All non-residential Leases, including renewals or extensions of existing Leases, shall specifically provide that (1) such Leases are subordinate to the lien of this Instrument (unless waived in writing by Lender); (2) the tenant shall attorn to Lender and any purchaser at a foreclosure sale, such attornment to be self-executing and effective upon acquisition of title to the Mortgaged Property by any purchaser at a foreclosure sale or by Lender in a ny manner; (3) the tenant agrees to execute such further evidences of attornment as Lender or any purchaser at a foreclosure sale may from time to time request; (4) the Lease shall not be terminated by foreclosure or any other transfer of the Mortgaged Property; (5) after a foreclosure sale of the Mortgaged Property, Lender or any other purchaser at such foreclosure sale may, at Lender's or such purchaser's option, accept or terminate such Lease; and (6) the tenant shall, upon receipt after the occurrence of an Event of Default of a written request from Lender, pay all Rents payable under the Lease to Lender.

(g)

(g) Borrower shall not receive or accept Rent under any Lease (whether residential or non-residential) for more than two months in advance.

5.

5. PAYMENT OF INDEBTEDNESS; PERFORMANCE UNDER LOAN DOCUMENTS; PREPAYMENT PREMIUM.  Borrower shall pay the Indebtedness when due in accordance with the terms of the Note and the other Loan Documents and shall perform, observe and comply with all other provisions of the Note and the other Loan Documents.  Borrower shall pay a prepayment premium in connection with certain prepayments of the Indebtedness, including a payment made after Lender's exercise of any right of acceleration of the Indebtedness, as provided in the Note.

6.

6. EXCULPATION.  Borrower’s personal liability for payment of the Indebtedness and for performance of the other obligations to be performed by it under this Instrument is limited in the manner, and to the extent, provided in the Note.

7.

7. DEPOSITS FOR TAXES, INSURANCE AND OTHER CHARGES.

(a)

(a) Borrower shall deposit with Lender on the day monthly installments of principal or interest, or both, are due under the Note (or on another day designated in writing by Lender), until the Indebtedness is paid in full, an additional amount sufficient to accumulate with Lender the entire sum required to pay, when due (1) any water and sewer charges which, if not paid, may result in a lien on all or any part of the Mortgaged Property, (2) the premiums for fire and other hazard insurance, rent loss insurance and such other insurance as Lender may require under Section 19, (3) Taxes, and (4) amounts for other charges and expenses which Lender at any time reasonably deems necessary to protect the Mortgaged Property, to prevent the imposition of liens on the Mortgaged Property, or otherwise to protect Lender's interests, all as reasonably estimated from time to time by Lender.  The amounts deposited under the preceding sentence are collectively referred to in this Instrument as the "Imposition Deposits".  The obligations of Borrower for which the Imposition Deposits are required are collectively referred to in this Instrument as "Impositions".  The amount of the Imposition Deposits shall be sufficient to enable Lender to pay each Imposition before the last date upon which such payment may be made without any penalty or interest charge being added.  Lender shall maintain records indicating how much of the monthly Imposition Deposits and how much of the aggregate Imposition Deposits held by Lender are held for the purpose of paying Taxes, insurance premiums and each other obligation of Borrower for which Imposition Deposits are required.  

Any waiver by Lender of the requirement that Borrower remit Imposition Deposits to Lender may be revoked by Lender, in Lender's discretion, at any time upon notice to Borrower.

(b)

(b) Imposition Deposits shall be held in an institution (which may be Lender, if Lender is such an institution) whose deposits or accounts are insured or guaranteed by a federal agency.  Lender shall not be obligated to open additional accounts or deposit Imposition Deposits in additional institutions when the amount of the Imposition Deposits exceeds the maximum amount of the federal deposit insurance or guaranty.  Lender shall apply the Imposition Deposits to pay Impositions so long as no Event of Default has occurred and is continuing.  Unless applicable law requires, Lender shall not be required to pay Borrower any interest, earnings or profits on the Imposition Deposits.  Borrower hereby pledges and grants to Lender a security interest in the Imposition Deposits as additional security for all of Borrower's obligations under this Instrument and the other Loan Documents.  Any amounts deposited with Lender under this Section 7 shall not be trust funds, nor shall they operate t o reduce the Indebtedness, unless applied by Lender for that purpose under Section 7(e).

(c)

(c) If Lender receives a bill or invoice for an Imposition, Lender shall pay the Imposition from the Imposition Deposits held by Lender.  Lender shall have no obligation to pay any Imposition to the extent it exceeds Imposition Deposits then held by Lender.  Lender may pay an Imposition according to any bill, statement or estimate from the appropriate public office or insurance company without inquiring into the accuracy of the bill, statement or estimate or into the validity of the Imposition.

(d)

(d) If at any time the amount of the Imposition Deposits held by Lender for payment of a specific Imposition exceeds the amount reasonably deemed necessary by Lender, the excess shall be credited against future installments of Imposition Deposits.  If at any time the amount of the Imposition Deposits held by Lender for payment of a specific Imposition is less than the amount reasonably estimated by Lender to be necessary, Borrower shall pay to Lender the amount of the deficiency within 15 days after notice from Lender.

(e)

(e) If an Event of Default has occurred and is continuing, Lender may apply any Imposition Deposits, in any amounts and in any order as Lender determines, in Lender's discretion, to pay any Impositions or as a credit against the Indebtedness. Upon payment in full of the Indebtedness, Lender shall refund to Borrower any Imposition Deposits held by Lender.

8.

8. COLLATERAL AGREEMENTS.  Borrower shall deposit with Lender such amounts as may be required by any Collateral Agreement and shall perform all other obligations of Borrower under each Collateral Agreement.

9.

9. APPLICATION OF PAYMENTS.  If at any time Lender receives, from Borrower or otherwise, any amount applicable to the Indebtedness which is less than all amounts due and payable at such time, then Lender may apply that payment to amounts then due and payable in any manner and in any order determined by Lender, in Lender's discretion.  Neither Lender's acceptance of an amount which is less than all amounts then due and payable nor Lender's application of such payment in the manner authorized shall constitute or be deemed to constitute either a waiver of the unpaid amounts or an accord and satisfaction.  Notwithstanding the application of any such amount to the Indebtedness,  Borrower’s obligations under this Instrument and the Note shall remain unchanged.

10.

10. COMPLIANCE WITH LAWS.  Borrower shall comply with all laws, ordinances, regulations and requirements of any Governmental Authority and all recorded lawful covenants and agreements relating to or affecting the Mortgaged Property, including all laws, ordinances, regulations, requirements and covenants pertaining to health and safety, construction of improvements on the Mortgaged Property, fair housing, zoning and land use, and Leases.  Borrower also shall comply with all applicable laws that pertain to the maintenance and disposition of tenant security deposits.  Borrower shall at all times maintain records sufficient to demonstrate  compliance with the provisions of this Section 10.  Borrower shall take appropriate measures to prevent, and shall not engage in or knowingly permit, any illegal activities at the Mortgaged Property that could endanger tenants or visitors, result in damage to the Mortgaged Property, result in forfeiture of the Mortg aged Property, or otherwise materially impair the lien created by this Instrument or Lender's interest in the Mortgaged Property.  Borrower represents and warrants to Lender that no portion of the Mortgaged Property has been or will be purchased with the proceeds of any illegal activity.

11.

11. USE OF PROPERTY.  Unless required by applicable law, Borrower shall not (a) except for any change in use approved by Lender, allow changes in the use for which all or any part of the Mortgaged Property is being used at the time this Instrument was executed, (b) convert any individual dwelling units or common areas to commercial use, (c) initiate or acquiesce in a change in the zoning classification of the Mortgaged Property, or (d) establish any condominium or cooperative regime with respect to the Mortgaged Property.

12.

12. PROTECTION OF LENDER'S SECURITY.

(a)

(a) If Borrower fails to perform any of its obligations under this Instrument or any other Loan Document, or if any action or proceeding is commenced which purports to affect the Mortgaged Property, Lender's security or Lender's rights under this Instrument, including eminent domain, insolvency, code enforcement, civil or criminal forfeiture, enforcement of Hazardous Materials Laws, fraudulent conveyance or reorganizations or proceedings involving a bankrupt or decedent, then Lender at Lender's option may make such appearances, disburse such sums and take such actions as Lender reasonably deems necessary to perform such obligations of Borrower and to protect Lender's interest, including (1) payment of fees and out-of-pocket expenses of attorneys, accountants, inspectors and consultants, (2) entry upon the Mortgaged Property to make repairs or secure the Mortgaged Property, (3) procurement of the insurance required by Section 19, and (4) payment of amounts which Borrower has failed to pay under Sections& nbsp;15 and 17.

(b)

(b) Any amounts disbursed by Lender under this Section 12, or under any other provision of this Instrument that treats such disbursement as being made under this Section 12, shall be added to, and become part of, the principal component of the Indebtedness, shall be immediately due and payable and shall bear interest from the date of disbursement until paid at the "Default Rate", as defined in the Note.

(c)

(c) Nothing in this Section 12 shall require Lender to incur any expense or take any action.

13.

13. INSPECTION.  Lender, its agents, representatives, and designees may make or cause to be made entries upon and inspections of the Mortgaged Property (including environmental inspections and tests) during normal business hours, or at any other reasonable time.

14.

14. BOOKS AND RECORDS; FINANCIAL REPORTING.

(a)

(a) Borrower shall keep and maintain at all times at the Mortgaged Property or the management agent's offices, and upon Lender's request shall make available at the Mortgaged Property, complete and accurate books of account and records (including copies of supporting bills and invoices) adequate to reflect correctly the operation of the Mortgaged Property, and copies of all written contracts, Leases, and other instruments which affect the Mortgaged Property.  The books, records, contracts, Leases and other instruments shall be subject to examination and inspection at any reasonable time by Lender.

(b)

(b) Borrower shall furnish to Lender all of the following:

(1)

within 120 days after the end of each fiscal year of Borrower, a statement of income and expenses for Borrower's operation of the Mortgaged Property for that fiscal year, a statement of changes in financial position of Borrower relating to the Mortgaged Property for that fiscal year and, when requested by Lender, a balance sheet showing all assets and liabilities of Borrower relating to the Mortgaged Property as of the end of that fiscal year;

(2)

within 120 days after the end of each fiscal year of Borrower, and at any other time upon Lender's request, a rent schedule for the Mortgaged Property showing the name of each tenant, and for each tenant, the space occupied, the lease expiration date, the rent payable for the current month, the date through which rent has been paid, and any related information requested by Lender;

(3)

within 120 days after the end of each fiscal year of Borrower, and at any other time upon Lender's request, an accounting of all security deposits held pursuant to all Leases, including the name of the institution (if any) and the names and identification numbers of the accounts (if any) in which such security deposits are held and the name of the person to contact at such financial institution, along with any authority or release necessary for Lender to access information regarding such accounts;

(4)

within 120 days after the end of each fiscal year of Borrower, and at any other time upon Lender's request, a statement that identifies all owners of any interest in Borrower and the interest held by each, if Borrower is a corporation, all officers and directors of Borrower, and if Borrower is a limited liability company, all managers who are not members;

(5)

upon Lender's request, a monthly property management report for the Mortgaged Property, showing the number of inquiries made and rental applications received from tenants or prospective tenants and deposits received from tenants and any other information requested by Lender;

(6)

upon Lender's request, a balance sheet, a statement of income and expenses for Borrower and a statement of changes in financial position of Borrower for Borrower's most recent fiscal year; and

(7)

if required by Lender, a statement of income and expense for the Mortgaged Property for the prior month or quarter.

(c)

(c) Each of the statements, schedules and reports required by Section 14(b) shall be certified to be complete and accurate by an individual having authority to bind Borrower, and shall be in such form and contain such detail as Lender may reasonably require.  Lender also may require that any statements, schedules or reports be audited at Borrower's expense by independent certified public accountants acceptable to Lender.

(d)

(d) If Borrower fails to provide in a timely manner the statements, schedules and reports required by Section 14(b), Lender shall have the right to have Borrower's books and records audited, at Borrower’s expense, by independent certified public accountants selected by Lender in order to obtain such statements, schedules and reports, and all related costs and expenses of Lender shall become immediately due and payable and shall become an additional part of the Indebtedness as provided in Section 12.

(c) (e)

(e) If an Event of Default has occurred and is continuing, Borrower shall deliver to Lender upon written demand all books and records relating to the Mortgaged Property or its operation.

(f)

(f) Borrower authorizes Lender to obtain a credit report on Borrower at any time.

(g)

(g) If an Event of Default has occurred and Lender has not previously required Borrower to furnish a quarterly statement of income and expense for the Mortgaged Property, Lender may require Borrower to furnish such a statement within 45 days after the end of each fiscal quarter of Borrower following such Event of Default.

15.

15. TAXES; OPERATING EXPENSES.

(a)

(a) Subject to the provisions of Section 15(c) and Section 15(d), Borrower shall pay, or cause to be paid, all Taxes when due and before the addition of any interest, fine, penalty  or cost for nonpayment.  

(b)

(b) Subject to the provisions of Section 15(c), Borrower shall pay the expenses of operating, managing, maintaining and repairing the Mortgaged Property (including insurance premiums, utilities, repairs and replacements) before the last date upon which each such payment may be made without any penalty or interest charge being added.

(c)

(c) As long as no Event of Default exists and Borrower has timely delivered to Lender any bills or premium notices that it has received, Borrower shall not be obligated to pay Taxes, insurance premiums or any other individual Imposition to the extent that sufficient Imposition Deposits are held by Lender for the purpose of paying that specific Imposition.  If an Event of Default exists, Lender may exercise any rights Lender may have with respect to Imposition Deposits without regard to whether Impositions are then due and payable.  Lender shall have no liability to Borrower for failing to pay any Impositions to the extent that any Event of Default has occurred and is continuing, insufficient Imposition Deposits are held by Lender at the time an Imposition becomes due and payable or Borrower has failed to provide Lender with bills and premium notices as provided above.

(d)

(d) Borrower, at its own expense, may contest by appropriate legal proceedings, conducted diligently and in good faith, the amount or validity of any Imposition other than insurance premiums, if (1) Borrower notifies Lender of the commencement or expected commencement of such proceedings, (2) the Mortgaged Property is not in danger of being sold or forfeited, (3) Borrower deposits with Lender reserves sufficient to pay the contested Imposition, if requested by Lender, and (4) Borrower furnishes whatever additional security is required in the proceedings or is reasonably requested by Lender, which may include the delivery to Lender of the reserves established by Borrower to pay the contested Imposition.

(e)

(e) Borrower shall promptly deliver to Lender a copy of all notices of, and invoices for, Impositions, and if Borrower pays any Imposition directly, Borrower shall promptly furnish to Lender receipts evidencing such payments.

16.

16. LIENS; ENCUMBRANCES.  Borrower acknowledges that, to the extent provided in Section 21, the grant, creation or existence of any mortgage, deed of trust, deed to secure debt, security interest or other lien or encumbrance (a "Lien") on the Mortgaged Property (other than the lien of this Instrument) or on certain ownership interests in Borrower, whether voluntary, involuntary or by operation of law, and whether or not such Lien has priority over the lien of this Instrument, is a "Transfer" which constitutes an Event of Default.

17.

17. PRESERVATION, MANAGEMENT AND MAINTENANCE OF MORTGAGED PROPERTY.  

(a)

(a) Borrower (1) shall not commit waste or permit impairment or deterioration of the Mortgaged Property, (2) shall not abandon the Mortgaged Property, (3) shall restore or repair promptly, in a good and workmanlike manner, any damaged part of the Mortgaged Property to the equivalent of its original condition, or such other condition as Lender may approve in writing, whether or not insurance proceeds or condemnation awards are available to cover any costs of such restoration or repair, (4) shall keep the Mortgaged Property in good repair, including the replacement of Personalty and Fixtures with items of equal or better function and quality, (5) shall provide for professional management of the Mortgaged Property by a residential rental property manager satisfactory to Lender under a contract approved by Lender in writing, and (6) shall give notice to Lender of and, unless otherwise directed in writing by Lender, shall appear in and defend any action or proceeding purporting to affect the Mortgaged Property, L ender's security or Lender's rights under this Instrument.  Borrower shall not (and shall not permit any tenant or other person to) remove, demolish or alter the Mortgaged Property or any part of the Mortgaged Property except in connection with the replacement of tangible Personalty.

(b)

(b) If, in connection with the making of the loan evidenced by the Note or at any later date, Lender waives in writing the requirement of Section 17(a)(5) above that Borrower enter into a written contract for management of the Mortgaged Property and if, after the date of this Instrument, Borrower intends to change the management of the Mortgaged Property, Lender shall have the right to approve such new property manager and the written contract for the management of the Mortgaged Property and require that Borrower and such new property manager enter into an Assignment of Management Agreement on a form approved by Lender.  If required by Lender (whether before or after an Event of Default), Borrower will cause any Affiliate of Borrower to whom fees are payable for the management of the Mortgaged Property to enter into an agreement with Lender, in a form approved by Lender, providing for subordination of those fees and such other provisions as Lender may require.  "Affiliate of Borrower" mea ns any corporation, partnership, joint venture, limited liability company, limited liability partnership, trust or individual controlled by, under common control with, or which controls Borrower (the term "control" for these purposes shall mean the ability, whether by the ownership of shares or other equity interests, by contract or otherwise, to elect a majority of the directors of a corporation, to make management decisions on behalf of, or independently to select the managing partner of, a partnership, or otherwise to have the power independently to remove and then select a majority of those individuals exercising managerial authority over an entity, and control shall be conclusively presumed in the case of the ownership of 50% or more of the equity interests).

18.

18. ENVIRONMENTAL HAZARDS.

(a)

(a) Except for matters covered by a written program of operations and maintenance approved in writing by Lender (an "O&M Program") or matters described in Section 18(b), Borrower shall not cause or permit any of the following:

(1)

the presence, use, generation, release, treatment, processing, storage (including storage in above ground and underground storage tanks), handling, or disposal of any Hazardous Materials on or under the Mortgaged Property or any other  property of Borrower that is adjacent to the Mortgaged Property;

(2)

the transportation of any Hazardous Materials to, from, or across the Mortgaged Property;

(3)

any occurrence or condition on the Mortgaged Property or any other property of Borrower that is adjacent to the Mortgaged Property, which occurrence or condition is or may be in violation of Hazardous Materials Laws; or

(4)

any violation of or noncompliance with the terms of any Environmental Permit with respect to the Mortgaged Property or any  property of Borrower that is adjacent to the Mortgaged Property.

The matters described in clauses (1) through (4) above are referred to collectively in this Section 18 as "Prohibited Activities or Conditions".

(b)

(b) Prohibited Activities and Conditions shall not include the safe and lawful use and storage of quantities of (1) pre-packaged supplies, cleaning materials and petroleum products customarily used in the operation and maintenance of comparable multifamily properties, (2) cleaning materials, personal grooming items and other items sold in pre-packaged containers for consumer use and used by tenants and occupants of residential dwelling units in the Mortgaged Property; and (3) petroleum products used in the operation and maintenance of motor vehicles from time to time located on the Mortgaged Property’s parking areas, so long as all of the foregoing are used, stored, handled, transported and disposed of in compliance with Hazardous Materials Laws.

(c)

(c) Borrower shall take all commercially reasonable actions (including the inclusion of appropriate provisions in any Leases executed after the date of this Instrument) to prevent its employees, agents, and contractors, and all tenants and other occupants from causing or permitting any Prohibited Activities or Conditions.  Borrower shall not lease or allow the sublease or use of all or any portion of the Mortgaged Property to any tenant or subtenant for nonresidential use by any user that, in the ordinary course of its business, would cause or permit any Prohibited Activity or Condition.

(d)

(d) If an O&M Program has been established with respect to Hazardous Materials, Borrower shall comply in a timely manner with, and cause all employees, agents, and contractors of Borrower and any other persons present on the Mortgaged Property to comply with the O&M Program.  All costs of performance of Borrower's obligations under any O&M Program shall be paid by Borrower, and Lender's out-of-pocket costs incurred in connection with the monitoring and review of the O&M Program and Borrower's performance shall be paid by Borrower upon demand by Lender.  Any such out-of-pocket costs of Lender which Borrower fails to pay promptly shall become an additional part of the Indebtedness as provided in Section 12.

(e)

(e) Borrower represents and warrants to Lender that, except as previously disclosed by Borrower to Lender in writing:

(1)

Borrower has not at any time engaged in, caused or permitted any Prohibited Activities or Conditions;

(2)

to the best of Borrower's knowledge after reasonable and diligent inquiry, no Prohibited Activities or Conditions exist or have existed;

(3)

except to the extent previously disclosed by Borrower to Lender in writing, the Mortgaged Property does not now contain any underground storage tanks, and, to the best of Borrower’s knowledge after reasonable and diligent inquiry, the Mortgaged Property has not contained any underground storage tanks in the past.  If there is an underground storage tank located on the Property which has been previously disclosed by

Borrower to Lender in writing, that tank complies with all requirements of Hazardous Materials Laws;

(4)

Borrower has complied with all Hazardous Materials Laws, including all requirements for notification regarding releases of Hazardous Materials.  Without limiting the generality of the foregoing, Borrower has obtained all Environmental Permits required for the operation of the Mortgaged Property in accordance with Hazardous Materials Laws now in effect and all such Environmental Permits are in full force and effect;  

(5)

no event has occurred with respect to the Mortgaged Property that constitutes, or with the passing of time or the giving of notice would constitute, noncompliance with the terms of any Environmental Permit;

(6)

there are no actions, suits, claims or proceedings pending or, to the best of Borrower’s knowledge after reasonable and diligent inquiry, threatened  that involve the Mortgaged Property and allege, arise out of, or relate to any Prohibited Activity or Condition; and

(7)

Borrower has not received any complaint, order, notice of violation or other communication from any Governmental Authority with regard to air emissions, water discharges, noise emissions or Hazardous Materials, or any other environmental, health or safety matters affecting the Mortgaged Property or any other property of Borrower that is adjacent to the Mortgaged Property.

The representations and warranties in this Section 18 shall be continuing representations and warranties that shall be deemed to be made by Borrower throughout the term of the loan evidenced by the Note, until the Indebtedness has been paid in full.

(f)

(f) Borrower shall promptly notify Lender in writing upon the occurrence of any of  the following events:

(1)

Borrower's discovery of any Prohibited Activity or Condition;

(2)

Borrower’s receipt of or knowledge of any complaint, order, notice of violation or other communication from any Governmental Authority or other person with regard to present or future alleged Prohibited Activities or Conditions or any other environmental, health or safety matters affecting the Mortgaged Property or any other property of Borrower that is adjacent to the Mortgaged Property; and  

(3)

any representation or warranty in this Section 18 becomes untrue after the date of this Agreement.

Any such notice given by Borrower shall not relieve Borrower of, or result in a waiver of, any obligation under this Instrument, the Note, or any other Loan Document.

(g)

(g) Borrower shall pay promptly the costs of any environmental inspections, tests or audits ("Environmental Inspections") required by Lender in connection with any foreclosure or deed in lieu of foreclosure, or as a condition of Lender’s consent to any Transfer under Section 21, or required by Lender following a reasonable determination by Lender that Prohibited Activities or Conditions may exist.  Any such costs incurred by Lender (including the fees and out-of-pocket costs of attorneys and technical consultants whether incurred in connection with any judicial or administrative process or otherwise) which Borrower fails to pay promptly shall become an additional part of the Indebtedness as provided in Section 12.  The results of all Environmental Inspections made by Lender shall at all times remain the property of Lender and Lender shall have no obligation to disclose or otherwise make available to Borrower or any other party such results or any other information ob tained by Lender in connection with its Environmental Inspections.  Lender hereby reserves the right, and Borrower hereby expressly authorizes Lender, to make available to any party, including any prospective bidder at a foreclosure sale of the Mortgaged Property, the results of any Environmental Inspections made by Lender with respect to the Mortgaged Property.  Borrower consents to Lender notifying any party (either as part of a notice of sale or otherwise) of the results of any of Lender's Environmental Inspections.  Borrower acknowledges that Lender cannot control or otherwise assure the truthfulness or accuracy of the results of any of its Environmental Inspections and that the release of such results to prospective bidders at a foreclosure sale of the Mortgaged Property may have a material and adverse effect upon the amount which a party may bid at such sale.  Borrower agrees that Lender shall have no liability whatsoever as a result of delivering the results of any of its Environme ntal Inspections to any third party, and Borrower hereby releases and forever discharges Lender from any and all claims, damages, or causes of action, arising out of, connected with or incidental to the results of, the delivery of any of Lender's Environmental Inspections.

(h)

(h) If any investigation, site monitoring, containment, clean-up, restoration or other remedial work ("Remedial Work") is necessary to comply with any Hazardous Materials Law or order of any Governmental Authority that has or acquires jurisdiction over the Mortgaged Property  or the use, operation or improvement of the Mortgaged Property under any Hazardous Materials Law, Borrower shall, by the earlier of (1) the applicable deadline required by Hazardous Materials Law or (2) 30 days after notice from Lender demanding such action, begin performing the Remedial Work, and thereafter diligently prosecute it to completion, and shall in any event complete the work by the time required by applicable Hazardous Materials Law.  If Borrower fails to begin on a timely basis or diligently prosecute any required Remedial Work, Lender may, at its option, cause the Remedial Work to be completed, in which case Borrower shall reimburse Lender on demand for the cost of doing so.  Any reimburseme nt due from Borrower to Lender shall become part of the Indebtedness as provided in Section 12.

(i)

(i) Borrower shall cooperate with any inquiry by any Governmental Authority and shall comply with any governmental or judicial order which arises from any alleged Prohibited Activity or Condition.

(j)

(j) Borrower shall indemnify, hold harmless and defend (i) Lender, (ii) any prior owner or holder of the Note, (iii) the Loan Servicer, (iv) any prior Loan Servicer, (v) the officers, directors, shareholders, partners, employees and trustees of any of the foregoing, and (vi) the heirs, legal representatives, successors and assigns of each of the foregoing (collectively, the "Indemnitees") from and against all proceedings, claims, damages, penalties and costs (whether initiated or sought by Governmental Authorities or private parties), including fees and out-of-pocket expenses of attorneys and expert witnesses, investigatory fees, and remediation costs, whether incurred in connection with any judicial or administrative process or otherwise, arising directly or indirectly from any of the following:

(1)

any breach of any representation or warranty of Borrower in this Section 18;  

(2)

any failure by Borrower to perform any of its obligations under this Section 18;

(3)

the existence or alleged existence of any Prohibited Activity or Condition;

(4)

the presence or alleged presence of Hazardous Materials on or under the Mortgaged Property or any property of Borrower that is adjacent to the Mortgaged Property; and

(5)

the actual or alleged violation of any Hazardous Materials Law.  

(k)

(k) Counsel selected by Borrower to defend Indemnitees shall be subject to the  approval of those Indemnitees.  However, any Indemnitee may elect to defend any claim or legal or administrative proceeding at the Borrower’s expense.  

(l)

(l) Borrower shall not, without the prior written consent of those Indemnitees who are named as parties to a claim or legal or administrative proceeding (a "Claim"), settle or compromise the Claim if the settlement (1) results in the entry of any judgment that does not include as an unconditional term the delivery by the claimant or plaintiff to Lender of a written release of those Indemnitees, satisfactory in form and substance to Lender; or (2) may materially and adversely affect Lender, as determined by Lender in its discretion.

(m)

(m) Lender agrees that the indemnity under this Section 18 shall be limited to the assets of Borrower and Lender shall not seek to recover any deficiency from any natural persons who are general partners of Borrower.

(n)

(n) Borrower shall, at its own cost and expense, do all of the following:

(1)

pay or satisfy any judgment or decree that may be entered against any Indemnitee or Indemnitees in any legal or administrative proceeding incident to any matters against which Indemnitees are entitled to be indemnified under this Section 18;

(2)

reimburse Indemnitees for any expenses paid or incurred in connection with any matters against which Indemnitees are entitled to be indemnified under this Section 18; and

(3)

reimburse Indemnitees for any and all expenses, including fees and out-of-pocket expenses of attorneys and expert witnesses, paid or incurred in connection with the enforcement by Indemnitees of their rights under this Section 18, or in monitoring and participating in any legal or administrative proceeding.

(o)

(o) In any circumstances in which the indemnity under this Section 18 applies, Lender may employ its own legal counsel and consultants to prosecute, defend or negotiate any claim or legal or administrative proceeding and Lender, with the prior written consent of Borrower (which shall not be unreasonably withheld, delayed or conditioned), may settle or compromise any action or legal or administrative proceeding.  Borrower shall reimburse Lender upon demand for all costs and expenses incurred by Lender, including all costs of settlements entered into in good faith, and the fees and out-of-pocket expenses of such attorneys and consultants.

(p)

(p) The provisions of this Section 18 shall be in addition to any and all other obligations and liabilities that Borrower may have  under applicable law or under other Loan Documents, and each Indemnitee shall be entitled to indemnification under this Section 18 without regard to whether Lender or that Indemnitee has exercised any rights against the Mortgaged Property or any other security, pursued any rights against any guarantor, or pursued any other rights available under the Loan Documents or applicable law. If Borrower consists of more than one person or entity, the obligation of those persons or entities to indemnify the Indemnitees under this Section 18 shall be joint and several. The obligation of Borrower to indemnify the Indemnitees under this Section 18 shall survive any repayment or discharge of the Indebtedness, any foreclosure proceeding, any foreclosure sale, any delivery of any deed in lieu of foreclosure, and any release of record of the lien of this Instrument.

19.

19. PROPERTY AND LIABILITY INSURANCE.

(a)

(a) Borrower shall keep the Improvements insured at all times against such hazards as Lender may from time to time require, which insurance shall include but not be limited to coverage against loss by fire and allied perils, general boiler and machinery coverage, and business income coverage.  Lender’s insurance requirements may change from time to time throughout the term of the Indebtedness.  If Lender so requires, such insurance shall also include sinkhole insurance, mine subsidence insurance, earthquake insurance, and, if the Mortgaged Property does not conform to applicable zoning or land use laws, building ordinance or law coverage.  If any of the Improvements is located in an area identified by the Federal Emergency Management Agency (or any successor to that agency) as an area having special flood hazards, and if flood insurance is available in that area, Borrower shall insure such Improvements against loss by flood.

(b)

(b) All premiums on insurance policies required under Section 19(a) shall be paid in the manner provided in Section 7, unless Lender has designated in writing another method of payment.  All such policies shall also be in a form approved by Lender.  All policies of property damage insurance shall include a non-contributing, non-reporting mortgage clause in favor of, and in a form approved by, Lender.  Lender shall have the right to hold the original policies or duplicate original policies of all insurance required by Section 19(a).  Borrower shall promptly deliver to Lender a copy of all renewal and other notices received by Borrower with respect to the policies and all receipts for paid premiums.  At least 30 days prior to the expiration date of a policy, Borrower shall deliver to Lender the original  (or a duplicate original) of a renewal policy in form satisfactory to Lender.

(c)

(c) Borrower shall maintain at all times commercial general liability insurance, workers’ compensation insurance and such other liability, errors and omissions and fidelity insurance coverages as Lender may from time to time require.

(d)

(d) All insurance policies and renewals of insurance policies required by this Section 19 shall be in such amounts and for such periods as Lender may from time to time require, and shall be issued by insurance companies satisfactory to Lender.

(e)

(e) Borrower shall comply with all insurance requirements and shall not permit any condition to exist on the Mortgaged Property that would invalidate any part of any insurance coverage that this Instrument requires Borrower to maintain.

(f)

(f) In the event of loss, Borrower shall give immediate written notice to the insurance carrier and to Lender.  Borrower hereby authorizes and appoints Lender as attorney-in-fact for Borrower to make proof of loss, to adjust and compromise any claims under policies of property damage insurance, to appear in and prosecute any action arising from such property damage insurance policies, to collect and receive the proceeds of property damage insurance, and to deduct from such proceeds Lender’s expenses incurred in the collection of such proceeds.  This power of attorney is coupled with an interest and therefore is irrevocable.  However, nothing contained in this Section 19 shall require Lender to incur any expense or take any action.  Lender may, at Lender’s option, (1) hold the balance of such proceeds to be used to reimburse Borrower for the cost of restoring and repairing the Mortgaged Property to the equivalent of its original condition or to a condition approved by Lender (the "Restoration"), or (2) apply the balance of such proceeds to the payment of the Indebtedness, whether or not then due. To the extent Lender determines to apply insurance proceeds to Restoration, Lender shall do so in accordance with Lender’s then-current policies relating to the restoration of casualty damage on similar multifamily properties.

(g)

(g) Lender shall not exercise its option to apply insurance proceeds to the payment of the Indebtedness if all of the following conditions are met:  (1) no Event of Default (or any event which, with the giving of notice or the passage of time, or both, would constitute an Event of Default) has occurred and is continuing; (2) Lender determines, in its discretion, that there will be sufficient funds to complete the Restoration; (3) Lender determines, in its discretion, that the rental income from the Mortgaged Property after completion of the Restoration will be sufficient to meet all operating costs and other expenses, Imposition Deposits, deposits to reserves and loan repayment obligations relating to the Mortgaged Property; (4) Lender determines, in its discretion, that the Restoration will be completed before the earlier of (A) one year before the maturity date of the Note or (B) one year after the date of the loss or casualty; and (5) upon Lender's request, Borrower provides Lender evidence of the av ailability during and after the Restoration of the insurance required to be maintained by Borrower pursuant to this Section 19.

(h)

(h) Borrower in and to any insurance policies and unearned insurance premiums and in and to the proceeds resulting from any damage to the Mortgaged Property prior to such sale or acquisition.

20.

20. CONDEMNATION.

(a)

(a) Borrower shall promptly notify Lender of any action or proceeding relating to any condemnation or other taking, or conveyance in lieu thereof, of all or any part of the Mortgaged Property, whether direct or indirect (a "Condemnation").  Borrower shall appear in and prosecute or defend any action or proceeding relating to any Condemnation unless otherwise directed by Lender in writing.  Borrower authorizes and appoints Lender as attorney-in-fact for Borrower to commence, appear in and prosecute, in Lender’s or Borrower’s name, any action or proceeding relating to any Condemnation and to settle or compromise any claim in connection with any Condemnation.  This power of attorney is coupled with an interest and therefore is irrevocable.  However, nothing contained in this Section 20 shall require Lender to incur any expense or take any action.  Borrower hereby transfers and assigns to Lender all right, title and interest of Borrower in and to any award or payment with respect to (i) any Condemnation, or any conveyance in lieu of Condemnation, and (ii) any damage to the Mortgaged Property caused by governmental action that does not result in a Condemnation.

(b)

(b) Lender may apply such awards or proceeds, after the deduction of Lender’s expenses incurred in the collection of such amounts, at Lender’s option, to the restoration or repair of the Mortgaged Property or to the payment of the Indebtedness, with the balance, if any, to Borrower.  Unless Lender otherwise agrees in writing, any application of any awards or proceeds to the Indebtedness shall not extend or postpone the due date of any monthly installments referred to in the Note, Section 7 of this Instrument or any Collateral Agreement, or change the amount of such installments.  Borrower agrees to execute such further evidence of assignment of any awards or proceeds as Lender may require.

21.

21. TRANSFERS OF THE MORTGAGED PROPERTY OR INTERESTS IN BORROWER.

(a)

(a) The occurrence of any of the following events shall constitute an Event of Default under this Instrument:

(1)

a Transfer of all or any part of the Mortgaged Property or any interest in the Mortgaged Property;

(2)

a Transfer of a Controlling Interest in Borrower;

(3)

a Transfer of a Controlling Interest in any entity which owns, directly or indirectly through one or more intermediate entities, a Controlling Interest in Borrower;

(4)

a Transfer of all or any part of Key Principal's ownership interests (other than limited partnership interests) in Borrower, or in any other entity which owns, directly or indirectly through one or more intermediate entities, an ownership interest in Borrower;

(5)

if Key Principal is an entity, (A) a Transfer of a Controlling Interest in Key Principal, or (B) a Transfer of a Controlling Interest in any entity which owns, directly or indirectly through one or more intermediate entities, a Controlling Interest in Key Principal;

(6)

if Borrower or Key Principal is a trust, the termination or revocation of such trust; and

(7)

a conversion of Borrower from one type of legal entity into another type of legal entity, whether or not there is a Transfer.

Lender shall not be required to demonstrate any actual impairment of its security or any increased risk of default in order to exercise any of its remedies with respect to an Event of Default under this Section 21.

(b)

(b) The occurrence of any of the following events shall not constitute an Event of Default under this Instrument, notwithstanding any provision of Section 21(a) to the contrary:

(1)

a Transfer to which Lender has consented;

(2)

a Transfer that occurs by devise, descent, or by operation of law upon the death of a natural person;

(3)

the grant of a leasehold interest in an individual dwelling unit for a term of two years or less not containing an option to purchase;

(4)

a Transfer of obsolete or worn out Personalty or Fixtures that are contemporaneously replaced by items of equal or better function and quality, which are free of liens, encumbrances and security interests other than those created by the Loan Documents or consented to by Lender;

(5)

the grant of an easement, if before the grant Lender determines that the easement will not materially affect the operation or value of the Mortgaged Property or Lender’s interest in the Mortgaged Property, and Borrower pays to Lender, upon demand, all costs and expenses incurred by Lender in connection with reviewing Borrower’s request; and

(6)

the creation of a tax lien or a mechanic’s, materialman’s or judgment lien against the Mortgaged Property which is bonded off, released of record or otherwise remedied to Lender’s satisfaction within 30 days of the date of creation.

(c)

(c) Lender shall consent, without any adjustment to the rate at which the Indebtedness secured by this Instrument bears interest or to any other economic terms of the Indebtedness, to a Transfer that would otherwise violate this Section 21 if, prior to the Transfer, Borrower has satisfied each of the following requirements:

(1)

the submission to Lender of all information required by Lender to make the determination required by this Section 21(c);

(2)

the absence of any Event of Default;

(3)

the transferee meets all of the eligibility, credit, management and other standards (including any standards with respect to previous relationships between Lender and the transferee and the organization of the transferee) customarily applied by Lender at the time of the proposed Transfer to the approval of borrowers in connection with the origination or purchase of similar mortgages, deeds of trust or deeds to secure debt on multifamily properties;

(4)

the Mortgaged Property, at the time of the proposed Transfer, meets all standards as to its physical condition that are customarily applied by Lender at the time of the proposed Transfer to the approval of properties in connection with the origination or purchase of similar mortgages on multifamily properties;

(5)

in the case of a Transfer of all or any part of the Mortgaged Property, or direct or indirect ownership interests in Borrower or Key Principal (if an entity), if transferor or any other person has obligations under any Loan Document, the execution by the transferee or one or more individuals or entities acceptable to Lender of an assumption agreement (including, if applicable, an Acknowledgement and Agreement of Key Principal to Personal Liability for Exceptions to Non-Recourse Liability) that is acceptable to Lender and that, among other things, requires the transferee to perform all obligations of transferor or such person set forth in such Loan Document, and may require that the transferee comply with any provisions of this Instrument or any other Loan Document which previously may have been waived by Lender;

(6)

if a guaranty has been executed and delivered in connection with the Note, this Instrument or any of the other Loan Documents, the Borrower causes one or more individuals or entities acceptable to Lender to execute and deliver to Lender a guaranty in a form acceptable to Lender; and

(7)

Lender’s receipt of all of the following:

(A)

a non-refundable review fee in the amount of $3,000 and a transfer fee equal to 1 percent of the outstanding Indebtedness immediately prior to the Transfer.

(B)

In addition, Borrower shall be required to reimburse Lender for all of Lender's out-of-pocket costs (including reasonable attorneys’ fees) incurred in reviewing the Transfer request, to the extent such expenses exceed $3,000.

(d)

(d) For purposes of this Section, the following terms shall have the meanings set forth below:

(1)

"Initial Owners" means, with respect to Borrower or any other entity, the persons or entities who on the date of the Note own in the aggregate 100% of the ownership interests in Borrower or that entity.

(2)

A Transfer of a "Controlling Interest" shall mean, with respect to any entity, the following:

(i)

if such entity is a general partnership or a joint venture, a Transfer of any general partnership interest or joint venture interest which would cause the Initial Owners to own less than 51% of all general partnership or joint venture interests in such entity;

(ii)

if such entity is a limited partnership, a Transfer of any general partnership interest;

(iii)

if such entity is a limited liability company or a limited liability partnership, a Transfer of any membership or other ownership interest which would cause the Initial Owners to own less than 51% of all membership or other ownership interests in such entity;

(iv)

if such entity is a corporation (other than a Publicly-Held Corporation) with only one class of voting stock, a Transfer of any voting stock which would cause the Initial Owners to own less than 51% of voting stock in such corporation;

(v)

if such entity is a corporation (other than a Publicly-Held Corporation) with more than one class of voting stock, a Transfer of any voting stock which would cause the Initial Owners to own less than a sufficient number of shares of voting stock having the power to elect the majority of directors of such corporation; and

(vi)

if such entity is a trust, the removal, appointment or substitution of a trustee of such trust other than (A) in the case of a land trust, or (B) if the trustee of such trust after such removal, appointment or substitution is a trustee identified in the trust agreement approved by Lender.

(3)

"Publicly-Held Corporation" shall mean a corporation the outstanding voting stock of which is registered under Section 12(b) or 12(g) of the Securities and Exchange Act of 1934, as amended.

22.

22. EVENTS OF DEFAULT.  The occurrence of any one or more of the following shall constitute an Event of Default under this Instrument:

(a)

(a) any failure by Borrower to pay or deposit when due any amount required by the Note, this Instrument or any other Loan Document;

(b)

(b) any failure by Borrower to maintain the insurance coverage required by Section 19;

(c)

(c) any failure by Borrower to comply with the provisions of Section 33;

(d)

(d) fraud or material misrepresentation or material omission by Borrower, or any of its officers, directors, trustees, general partners or managers, Key Principal or any guarantor in connection with (A) the application for or creation of the Indebtedness, (B) any financial statement, rent roll, or other report or information provided to Lender during the term of the Indebtedness, or (C) any request for Lender’s consent to any proposed action, including a request for disbursement of funds under any Collateral Agreement;

(e)

(e) any Event of Default under Section 21;

(f)

(f) the commencement of a forfeiture action or proceeding, whether civil or criminal, which, in Lender’s reasonable judgment, could result in a forfeiture of the Mortgaged Property or otherwise materially impair the lien created by this Instrument or Lender’s interest in the Mortgaged Property;

(g)

(g) any failure by Borrower to perform any of its obligations under this Instrument (other than those specified in Sections 22(a) through (f)), as and when required, which continues for a period of 30 days after notice of such failure by Lender to Borrower, but no such notice or grace period shall apply in the case of any such failure which could, in Lender’s judgment, absent immediate exercise by Lender of a right or remedy under this Instrument, result in harm to Lender, impairment of the Note or this Instrument or any other security given under any other Loan Document;

(h)

(h) any failure by Borrower to perform any of its obligations as and when required under any Loan Document other than this Instrument which continues beyond the applicable cure period, if any, specified in that Loan Document; and

(i)

(i) any exercise by the holder of any other debt instrument secured by a mortgage, deed of trust or deed to secure debt on the Mortgaged Property of a right to declare all amounts due under that debt instrument immediately due and payable.

23.

23. REMEDIES CUMULATIVE. Each right and remedy provided in this Instrument is distinct from all other rights or remedies under this Instrument or any other Loan Document or afforded by applicable law, and each shall be cumulative and may be exercised concurrently, independently, or successively, in any order.

24.

24. FORBEARANCE.

(a)

(a) Lender may (but shall not be obligated to) agree with Borrower, from time to time, and without giving notice to, or obtaining the consent of, or having any effect upon the obligations of, any guarantor or other third party obligor, to take any of the following actions:  extend the time for payment of all or any part of the Indebtedness; reduce the payments due under this Instrument, the Note, or any other Loan Document; release anyone liable for the payment of any amounts under this Instrument, the Note, or any other Loan Document; accept a renewal of the Note; modify the terms and time of payment of the Indebtedness; join in any extension or subordination agreement; release any Mortgaged Property; take or release other or additional security; modify the rate of interest or period of amortization of the Note or change the amount of the monthly installments payable under the Note; and otherwise modify this Instrument, the Note, or any other Loan Document.

(b)

(b) Any forbearance by Lender in exercising any right or remedy under the Note, this Instrument, or any other Loan Document or otherwise afforded by applicable law, shall not be a waiver of or preclude the exercise of any other right or remedy.  The acceptance by Lender of payment of all or any part of the Indebtedness after the due date of such payment, or in an amount which is less than the required payment, shall not be a waiver of Lender’s right to require prompt payment when due of all other payments on account of the Indebtedness or to exercise any remedies for any failure to make prompt payment. Enforcement by Lender of any security for the Indebtedness shall not constitute an election by Lender of remedies so as to preclude the exercise of any other right available to Lender.  Lender’s receipt of any awards or proceeds under Sections 19 and 20 shall not operate to cure or waive any Event of Default.

25.

25. LOAN CHARGES.  If any applicable law limiting the amount of interest or other charges permitted to be collected from Borrower is interpreted so that any charge provided for in any Loan Document, whether considered separately or together with other charges levied in connection with any other Loan Document, violates that law, and Borrower is entitled to the benefit of that law, that charge is hereby reduced to the extent necessary to eliminate that violation.  The amounts, if any, previously paid to Lender in excess of the permitted amounts shall be applied by Lender to reduce the principal of the Indebtedness.  For the purpose of determining whether any applicable law limiting the amount of interest or other charges permitted to be collected from Borrower has been violated, all Indebtedness which constitutes interest, as well as all other charges levied in connection with the Indebtedness which constitute interest, shall be deemed to be allocated and spread ov er the stated term of the Note.  Unless otherwise required by applicable law, such allocation and spreading shall be effected in such a manner that the rate of interest so computed is uniform throughout the stated term of the Note.

26.

26. WAIVER OF STATUTE OF LIMITATIONS.  Borrower hereby waives the right to assert any statute of limitations as a bar to the enforcement of the lien of this Instrument or to any action brought to enforce any Loan Document.

27.

27. WAIVER OF MARSHALLING.  Notwithstanding the existence of any other security interests in the Mortgaged Property held by Lender or by any other party, Lender shall have the right to determine the order in which any or all of the Mortgaged Property shall be subjected to the remedies provided in this Instrument, the Note, any other Loan Document or applicable law.  Lender shall have the right to determine the order in which any or all portions of the Indebtedness are satisfied from the proceeds realized upon the exercise of such remedies.  Borrower and any party who now or in the future acquires a security interest in the Mortgaged Property and who has actual or constructive notice of this Instrument waives any and all right to require the marshalling of assets or to require that any of the Mortgaged Property be sold in the inverse order of alienation or that any of the Mortgaged Property be sold in parcels or as an entirety in connection with the exercise of any of the remedies permitted by applicable law or provided in this Instrument.

28.

28. FURTHER ASSURANCES.  Borrower shall execute, acknowledge, and deliver, at its sole cost and expense, all further acts, deeds, conveyances, assignments, estoppel certificates, financing statements, transfers and assurances as Lender may require from time to time in order to better assure, grant, and convey to Lender the rights intended to be granted, now or in the future, to Lender under this Instrument and the Loan Documents.

29.

29. ESTOPPEL CERTIFICATE.  Within 10 days after a request from Lender, Borrower shall deliver to Lender a written statement, signed and acknowledged by Borrower, certifying to Lender or any person designated by Lender, as of the date of such statement, (i) that the Loan Documents are unmodified and in full force and effect  (or, if there have been modifications, that the Loan Documents are in full force and effect as modified and setting forth such modifications); (ii) the unpaid principal balance of the Note; (iii) the date to which interest under the Note has been paid; (iv) that Borrower is not in default in paying the Indebtedness or in performing or observing any of the covenants or agreements contained in this Instrument or any of the other Loan Documents (or, if the Borrower is in default, describing such default in reasonable detail); (v) whether or not there are then existing any setoffs or defenses known to Borrower against the e nforcement of any right or remedy of Lender under the Loan Documents; and (vi) any additional facts requested by Lender.

30.

30. GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE.

(a)

(a) This Instrument, and any Loan Document which does not itself expressly identify the law that is to apply to it, shall be governed by the laws of the jurisdiction in which the Land is located (the "Property Jurisdiction").

(b)

(b) Borrower agrees that any controversy arising under or in relation to the Note, this Instrument, or any other Loan Document shall be litigated exclusively in the Property Jurisdiction.  The state and federal courts and authorities with jurisdiction in the Property Jurisdiction shall have exclusive jurisdiction over all controversies which shall arise under or in relation to the Note, any security for the Indebtedness, or any other Loan Document.  Borrower irrevocably consents to service, jurisdiction, and venue of such courts for any such litigation and waives any other venue to which it might be entitled by virtue of domicile, habitual residence or otherwise.

31.

31. NOTICE.

(a)

(a) All notices, demands and other communications ("notice") under or concerning this Instrument shall be in writing.  Each notice shall be addressed to the intended recipient at its address set forth in this Instrument, and shall be deemed given on the earliest to occur of (1) the date when the notice is received by the addressee; (2) the first Business Day after the notice is delivered to a recognized overnight courier service, with arrangements made for payment of charges for next Business Day delivery; or (3) the third Business Day after the notice is deposited in the United States mail with postage prepaid, certified mail, return receipt requested.  As used in this Section 31, the term "Business Day" means any day other than a Saturday, a Sunday or any other day on which Lender is not open for business.

(b)

(b) Any party to this Instrument may change the address to which notices intended for it are to be directed by means of notice given to the other party in accordance with this Section 31.  Each party agrees that it will not refuse or reject delivery of any notice given in accordance with this Section 31, that it will acknowledge, in writing, the receipt of any notice upon request by the other party and that any notice rejected or refused by it shall be deemed for purposes of this Section 31 to have been received by the rejecting party on the date so refused or rejected, as conclusively established by the records of the U.S. Postal Service or the courier service.

(c)

(c) Any notice under the Note and any other Loan Document which does not specify how notices are to be given shall be given in accordance with this Section 31.

32.

32. SALE OF NOTE; CHANGE IN SERVICER.  The Note or a partial interest in the Note (together with this Instrument and the other Loan Documents) may be sold one or more times without prior notice to Borrower.  A sale may result in a change of the Loan Servicer.  There also may be one or more changes of the Loan Servicer unrelated to a sale of the Note.  If there is a change of the Loan Servicer, Borrower will be given notice of the change.

33.

33. SINGLE ASSET BORROWER.  Until the Indebtedness is paid in full, Borrower (a) shall not acquire any real or personal property other than the Mortgaged Property and personal property related to the operation and maintenance of the Mortgaged Property;  (b) shall not operate any business other than the management and operation of the Mortgaged Property; and (c) shall not maintain its assets in a way difficult to segregate and identify.

34.

34. SUCCESSORS AND ASSIGNS BOUND.  This Instrument shall bind, and the rights granted by this Instrument shall inure to, the respective successors and assigns of Lender and Borrower.  However, a Transfer not permitted by Section 21 shall be an Event of Default.

35.

35. JOINT AND SEVERAL LIABILITY.  If more than one person or entity signs this Instrument as Borrower, the obligations of such persons and entities shall be joint and several.

36.

36. RELATIONSHIP OF PARTIES; NO THIRD PARTY BENEFICIARY.

(a)

(a) The relationship between Lender and Borrower shall be solely that of creditor and debtor, respectively, and nothing contained in this Instrument shall create any other relationship between Lender and Borrower.

(b)

(b) No creditor of any party to this Instrument and no other person shall be a third party beneficiary of this Instrument or any other Loan Document.  Without limiting the generality of the preceding sentence, (1) any arrangement (a "Servicing Arrangement") between the Lender and any Loan Servicer for loss sharing or interim advancement of funds shall constitute a contractual obligation of such Loan Servicer that is independent of the obligation of Borrower for the payment of the Indebtedness, (2) Borrower shall not be a third party beneficiary of any Servicing Arrangement, and (3) no payment by the Loan Servicer under any Servicing Arrangement will reduce the amount of the Indebtedness.

37.

37. SEVERABILITY; AMENDMENTS.  The invalidity or unenforceability of any provision of this Instrument shall not affect the validity or enforceability of any other provision, and all other provisions shall remain in full force and effect.  This Instrument contains the entire agreement among the parties as to the rights granted and the obligations assumed in this Instrument.  This Instrument may not be amended or modified except by a writing signed by the party against whom enforcement is sought.

38.

38. CONSTRUCTION.  The captions and headings of the sections of this Instrument are for convenience only and shall be disregarded in construing this Instrument.  Any reference in this Instrument to an "Exhibit" or a "Section" shall, unless otherwise explicitly provided, be construed as referring, respectively, to an Exhibit attached to this Instrument or to a Section of this Instrument.  All Exhibits attached to or referred to in this Instrument are incorporated by reference into this Instrument.  Any reference in this Instrument to a statute or regulation shall be construed as referring to that statute or regulation as amended from time to time.  Use of the singular in this Agreement includes the plural and use of the plural includes the singular.  As used in this Instrument, the term "including" means "including, but not limited to."

39.

39. LOAN SERVICING.  All actions regarding the servicing of the loan evidenced by the Note, including the collection of payments, the giving and receipt of notice, inspections of the Property, inspections of books and records, and the granting of consents and approvals, may be taken by the Loan Servicer unless Borrower receives notice to the contrary.  If Borrower receives conflicting notices regarding the identity of the Loan Servicer or any other subject, any such notice from Lender shall govern.

40.

40. DISCLOSURE OF INFORMATION.  Lender may furnish information regarding Borrower or the Mortgaged Property to third parties with an existing or prospective interest in the servicing, enforcement, evaluation, performance, purchase or securitization of the Indebtedness, including trustees, master servicers, special servicers, rating agencies, and organizations maintaining databases on the underwriting and performance of multifamily mortgage loans.  Borrower irrevocably waives any and all rights it may have under applicable law to prohibit such disclosure, including any right of privacy.

41.

41. NO CHANGE IN FACTS OR CIRCUMSTANCES.  All information in the application for the loan submitted to Lender (the "Loan Application") and in all financial statements, rent rolls, reports, certificates and other documents submitted in connection with the Loan Application are complete and accurate in all material respects.  There has been no material adverse change in any fact or circumstance that would make any such information incomplete or inaccurate.

42.

42. SUBROGATION.  If, and to the extent that, the proceeds of the loan evidenced by the Note are used to pay, satisfy or discharge any obligation of Borrower for the payment of money that is secured by a pre-existing mortgage, deed of trust or other lien encumbering the Mortgaged Property (a "Prior Lien"), such loan proceeds shall be deemed to have been advanced by Lender at Borrower’s request, and Lender shall automatically, and without further action on its part, be subrogated to the rights, including lien priority, of the owner or holder of the obligation secured by the Prior Lien, whether or not the Prior Lien is released.

43.

43. ACCELERATION; REMEDIES.  At any time during the existence of an Event of Default, Lender, at Lender's option, may declare the Indebtedness to be immediately due and payable without further demand, and may institute an action of mortgage foreclosure pursuant to applicable law and proceed to final judgment and execution thereon for the amount of the Indebtedness (as of the date of such judgment) and may invoke any other remedies permitted by applicable law or provided in this Instrument or in any other Loan Document.  Lender shall be entitled to collect all costs and expenses incurred in pursuing such remedies, including attorneys' fees, costs of documentary evidence, abstracts and title reports and the attorneys’ out of pocket expenses described in Paragraph 11 of the Note.  If Lender is the purchaser at the foreclosure sale of the Mortgaged Property, the foreclosure sale price (Lender’s final bid) shall be applied against the Indebtedness.

44.

44. PREPARATION AND FILING OF FINANCING STATEMENTS.  Borrower authorizes Lender to prepare, execute and file, on Borrower’s behalf and without Borrower’s signature, all financing statements and continuation statements under the Uniform Commercial Code necessary or appropriate to give notice of, or to perfect, Lender’s security interest in UCC Collateral.

45.

45. RELEASE.  Upon payment of the Indebtedness, Lender shall release this Instrument.  Borrower shall pay Lender's reasonable costs incurred in releasing this Instrument.

46.

46. WAIVER OF VALUATION AND APPRAISEMENT.  Borrower waives all right of valuation and appraisement.

47.

47. WAIVER OF TRIAL BY JURY.  BORROWER AND LENDER EACH (A) COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS INSTRUMENT OR THE RELATIONSHIP BETWEEN THE PARTIES AS BORROWER AND LENDER THAT IS TRIABLE OF RIGHT BY A JURY AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO SUCH ISSUE TO THE EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN THE FUTURE.  THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL.

ATTACHED EXHIBITS.  The following Exhibits are attached to this Instrument:

X	Exhibit A	Description of the Land (required)
X	Exhibit B	Modifications to Instrument

IN WITNESS WHEREOF, Borrower has signed and delivered this Instrument or has caused this Instrument to be signed and delivered by its duly authorized representative.

VMS NATIONAL PROPERTIES, an Illinois joint venture general partnership

By:  VMS National Residential Portfolio I, an Illinois limited partnership, its joint venture partner

By:  Maeril, Inc., a Delaware corporation, its general partner

By: /s/Patti K. Fielding

Patti K. Fielding

Executive Vice President and Treasurer

By:  VMS National Residential Portfolio II, an Illinois limited partnership, its joint venture partner

By:  Maeril, Inc., a Delaware corporation, its general partner

By: /s/Patti K. Fielding

Patti K. Fielding

Executive Vice President and Treasurer

EXHIBIT A

[DESCRIPTION OF THE LAND]

EXHIBIT B

Modifications to Security Instrument

The following modifications are made to the text of the Instrument that precedes this Exhibit:

1.

Paragraph 7 is amended to add the following subparagraph:

(f)

Notwithstanding the provisions of Subparagraph 7(a), Lender will not require Borrower to deposit with Lender amounts sufficient to accumulate with Lender the entire sum required to pay Taxes, provided that Borrower delivers to Lender a letter of credit and opinion of the letter of credit issuer’s counsel, both in form and content satisfactory to Lender in its sole discretion, in an amount equal to one (1) year’s Taxes.  In the event that Borrower does not timely pay Taxes or fails to provide Lender with proof of such payment, Lender shall have the right to (i) cash the letter of credit and apply the proceeds of the same to the payment of Taxes, (ii) deposit any proceeds in excess of the amount of Taxes then due and payable into Lender’s account for Imposition Deposits and (iii) require Borrower to deposit with Lender Imposition Deposits as provided in Subpar agraph 7(a).

2.

Paragraph 18(a) is amended to add the following sections:

(5)

the presence of any form of toxic mold or fungus in the Mortgaged Property of a type which may pose a significant risk to human health or the environment or would negatively impact the value of the Mortgaged Property (collectively “Mold”);

(6)

any activity, condition, event or omission that causes the growth of Mold on or in the Mortgaged Property.

3.

The defined term “Prohibited Activities or Conditions” is amended to include the matters described in Sections 18(a)(5) and 18(a)(6).

4.

A new Section 21(a)(8) is added as follows:

(8)

if, at any time, AIMCO REIT loses the authority or the ownership interests necessary to control, either directly or indirectly, Borrower and Guarantor and Borrower’s and Grantor’s Controlling Entities (“AIMCO Authorization”), Grantor covenants to send notice of such loss of AIMCO Authorization to Lender within fifteen (15) business days.  Such loss of AIMCO Authorization, shall be deemed a Transfer hereunder, and such Transfer shall constitute an Event of Default under Section 21(a) unless AIMCO REIT regains such AIMCO Authorization within sixty (60) days after the date of the loss.

5.

Section 33 is amended by adding the following sentences at the end of such Section:

“Borrower has disclosed to and provided Lender with information relating to assets it currently owns in addition to the Mortgaged Property (the “Disclosed Assets”).  Lender acknowledges that Borrower is not a single asset entity and agrees that Borrower may continue to own and operate the Disclosed Assets until September 30, 2007.  Until the Indebtedness is paid in full, Borrower (a) shall not acquire any real or personal property other than (i) the Mortgaged Property, (ii) the Disclosed Assets, (iii) personal property related to the operation and maintenance of the Mortgaged Property and the Disclosed Assets, and (iv) personal property and residences used primarily for the personal use of the Borrower and their family; (b) shall not operate any business other

than the management and operation of the Mortgaged Property and the Disclosed Assets; (c) shall not maintain its assets in a way which is difficult to segregate and identify and (d) grant, create or permit the existence of any new or additional mortgage, deed of trust, deed to secure debt or other lien encumbrance on any of the Disclosed Assets, the Mortgaged Property or ownership interest in the Borrower, whether voluntary, involuntary or by operation of law.  In the event the Property shall be transferred, the single asset requirements of the original Section 33 of this Instrument shall apply for any transferee.”

6.

The following new Section is added at the end of the Instrument after the last numbered Section, but there are no Sections between the last numbered Section and Section 55:

“55.  CONVEYANCE.

No later than September 30, 2007, Borrower shall convey all of its interest in the Mortgaged Property (the “Conveyance”) to a Lender-approved, single-asset, single purpose entity.  Failure to complete the Conveyance shall constitute an event of default under Section 22 of the Security Instrument.

The documents evidencing the Conveyance shall be submitted to Lender for review prior to the Conveyance, and shall be in form and substance satisfactory to Lender.  Borrower agrees to pay all costs incurred in connection with the Conveyance; including, without limitation, the legal fees, if any, of Lender’s attorneys in connection with the required review and approval and the endorsement to the Lender’s title insurance policy.

Completion of the Conveyance shall be evidenced by submission to Lender of the recorded conveyance documents and an endorsement to the Lender’s title insurance policy.

It is understood that no transfer or application fee shall be due in connection with the Conveyance, and that the Conveyance shall not be deemed to violate Section 21 of the Security Instrument respecting Transfers.”

7.

AIMCO STANDARD.

A.

Section 1(v) is modified to read as follows:

(v)

"Personalty" means all furniture, furnishings, equipment, machinery, building materials, appliances, goods, supplies, tools, books, records (whether in written or electronic form), computer equipment (hardware and software) and other tangible personal property (other than Fixtures) which are used now or in the future exclusively in connection with the ownership, management or operation of the Land or the Improvements or are located on the Land or in the Improvements, and any operating agreements relating to the Land or the Improvements, and any surveys, plans and specifications and contracts for architectural, engineering and construction services relating to the Land or the Improvements and all other intangible property and rights exclusively relating to the operation of, or used exclusively in connection with, the Land or the Improvements including all governmental permits relating to any activities on the Land.

B.

Section 7(c) is modified to read as follows:

(c)

Notwithstanding the provisions of  Section 7(a), Lender will not require Borrower to deposit with Lender amounts sufficient to accumulate with Lender the entire sum required to pay the water and sewer charges, fire, hazard or other insurance premiums, and ground rents.  At least annually, Borrower must provide Lender with proof of payment of all such Impositions for which Lender is not collecting Imposition Deposits.  In the event that Borrower does not timely pay any of the Impositions, or fails to provide Lender with proof of such payment, or upon the occurrence of an Event of Default hereunder, or upon Borrower’s failure to maintain the Mortgaged Property in a satisfactory manner in accordance with the requirements of this Instrument, then in any such events, Lender may require Borrower to deposit with Lender the Imposition Deposits as provided in Section 7(a).

C.

Except in a case where Lender in its discretion determines that an emergency exists, Lender may take actions specified in Section 12(a) only if Lender has notified Borrower of Borrower's failure to perform any of its obligations under this Instrument or any other Loan Document and Borrower does not cure the failure within ten (10) days after such notice.  If Lender so determines that an emergency exists, Lender shall notify Borrower of the action taken within ten (10) days after the action is taken.

D.

Sections 14(b)(4) and 14(b)(5) are modified to read as follows:

(4)

within 120 days after the end of each fiscal year of Borrower, and at any other time upon Lender's request, a statement that identifies all owners of any interest in Borrower and each general partner in Borrower, and confirming that the ownership of each other Controlling Entity has not changed in a manner that violates Section 21(a);

(5)

promptly following Lender's request, quarterly or monthly income and expense statements for the Property relating to a quarterly or monthly period, as the case may be, ending no later than 45 days before the request;

E.

For purposes of Section 14(b), Borrower shall be deemed to have delivered any statement or document "upon Lender's request" if Borrower has delivered the document promptly following Lender's request.

F.

Notwithstanding Section (14)(c), unless an Event of Default has occurred and is continuing, or Lender has determined that an event having a Material Adverse Effect has occurred, Lender may require that the financial statements required by Sections 14(b)(1), 14(b)(2) and 14(b)(3) be audited, but may not require that any other financial statements required by Section 14 be audited.  Certification of a statement by the chief financial officer of the entity that is the subject of the statement or, in the case of a partnership, the chief financial officer of the general partner, will be acceptable to Lender as certification by an individual having authority to bind Borrower.

G.

Lender shall not have Borrower's books and records audited pursuant to Section 14(d) unless Lender has given Borrower notice specifying the statements, schedules and reports required by Section 14(b) that Borrower has failed to provide, and Borrower has not provided such statements by the expiration of ten days after such notice.

H.

So long as Borrower is contesting the amount and validity of any Imposition other than insurance premiums diligently and in good faith as described in Section 15(d) and all of the conditions specified in clauses (1) through (4) of Section 15(d) are satisfied, Lender will refrain from applying Imposition Deposits to payment of the contested Imposition.

I.

Section 15(e) and Section 16 are modified to read as follows:

15(e)

Borrower shall promptly deliver to Lender a copy of all notices of, and invoices for Impositions, and if Borrower pays any Imposition directly (which Borrower has no obligation to do unless Imposition Deposits have been waived or are insufficient and Lender has notified Borrower of that insufficiency), Borrower shall promptly furnish to Lender receipts evidencing such payments.

16.

LIENS; ENCUMBRANCES.  Borrower acknowledges that, to the extent provided in Section 21, the grant, creation or existence of any mortgage, deed of trust, deed to secure debt, security interest or other lien or encumbrance (a “Lien”) on the Mortgaged Property (other than the lien of this Instrument), or on certain ownership interests in Borrower, whether voluntary, involuntary or by operation of law, and whether or not such lien has priority over the lien of this Instrument, is a “Transfer” which constitutes an Event of Default.

J.

For purposes of Section 18(b), "pre-packaged supplies, cleaning materials and petroleum products customarily used in the operation and maintenance of comparable multifamily properties" shall include, without limitation, pool, spa, maintenance and gardening materials.

K.

The second sentence of Section 18(c) is modified to read as follows:

Borrower shall not lease or allow the sublease or use of all or any portion of the Mortgaged Property to any tenant or subtenant for nonresidential use by any user that, in the ordinary course of its business, would be reasonably expected to cause or permit any Prohibited Activity or Condition.

L.

For purposes of Section 18(d), Borrower shall only be obligated to pay out-of-pocket expenses incurred by Lender in connection with the monitoring and review of an O&M Program and Borrower's performance to the extent such expenses are reasonable.

M.

Borrower's representation and warranty in Section 18(e)(4) regarding requirements for notification regarding releases of Hazardous Materials shall relate only to such releases, if any, at or affecting the Mortgaged Property.

N.

Section 18(e)(5) is modified to read as follows:

(5)

no event has occurred with respect to the Mortgaged Property that constitutes, or with the passing of time or the giving of notice would reasonably be expected to constitute, noncompliance with the terms of any Environmental Permit;

O.

Section 18(g) is modified to read as follows:

(g)

Borrower shall pay promptly the costs of any environmental inspections, tests or audits ("Environmental Inspections") required by Lender in connection with or in preparation for any foreclosure or deed in lieu of foreclosure.  Borrower shall also pay promptly the reasonable costs of any Environmental Inspections required by Lender in connection with, or as a condition of Lender's consent to any Transfer under Section 21, or required by Lender following a reasonable determination by Lender that Prohibited Activities or Conditions may exist.  Any such costs incurred by Lender (including the fees and out-of-pocket costs of attorneys and technical consultants whether incurred in connection with any judicial or administrative process or otherwise) which Borrower fails to pay promptly shall become an additional part of the Indebte dness as provided in Section 12. The results of all Environmental Inspections made by Lender in connection with or in preparation for any foreclosure or deed in lieu of foreclosure shall at all times remain the property of Lender and Lender shall have no obligation to disclose such results to or otherwise make such results available to Borrower or any other party.  Lender will make available to Borrower the results of all other Environmental Inspections made by Lender.  Lender hereby reserves the right, and Borrower hereby expressly authorizes Lender, to make available to any party, including any prospective bidder at a foreclosure sale of the Mortgaged Property, the results of any Environmental Inspections made by Lender with respect to the Mortgaged Property.  Borrower consents to Lender notifying any party (either as part of a notice of sale or otherwise) of the results of any of Lender's Environmental Inspections.  Except in the case of an Environmental Inspection performed in connect ion with a foreclosure or deed in lieu of foreclosure, or a disclosure of Environmental Inspection results that Lender is required by law to make, Lender shall notify Borrower of its intention to disclose such information and shall give Borrower ten days to provide supplemental information, explanations or corrections to accompany the disclosure. Borrower acknowledges that Lender cannot control or otherwise assure the truthfulness or accuracy of the results of any of its Environmental Inspections and that the release of such results to prospective bidders at a foreclosure sale of the Mortgaged Property may have a material and adverse effect upon the amount which a party may bid at such sale.  Borrower agrees that Lender shall have no liability whatsoever as a result of delivering the results of any of its Environmental Inspections to any third party, and Borrower hereby releases and forever discharges Lender from any and all claims, damages, or causes of

action, arising, out of, connected with or incidental to the results of, the delivery of any of Lender's Environmental Inspections.

P.

Lender shall not commence Remedial Work under the second sentence of Section 18(h) unless Lender has given Borrower notice of its intention to do so and Borrower has not begun performing the Remedial Work within 10 days after such notice.

Q.

The following sentence is added at the end of Section 18(j):

However, Borrower shall have no obligation to indemnify any of the foregoing parties to the extent that the proceedings, claims, damages, penalties or costs arise out of the gross negligence or willful misconduct of Lender, any prior owner or holder of the Note, the Loan Servicer or any prior Loan Servicer.

R.

For purposes of Section 19(b), Lender will accept a duplicate original of any insurance policy.

S.

For purposes of Section 19(d), an insurance company will be acceptable to Lender if it has a rating in Best's Key Rating Guide of at least "A-" and a financial size category of at least “v,” provided that if Fannie Mae changes its requirements for the financial rating of insurers generally, Lender may change the requirement set forth in this sentence in a manner consistent with any such change.

T.

Clause (2) of Section 19(g) is modified to read as follows:

(2)

Lender determines, in its discretion, that the combination of insurance proceeds and amounts provided by the Borrower will be sufficient to complete the Restoration.

U.

For purposes of Section 19(h), Lender shall automatically succeed to rights of Borrower in and to insurance policies and unearned premiums only to the extent permitted by the applicable policies and insurance companies.

V.

Section 21(a)(2) is modified to read as follows:

(2)

if Borrower is a joint venture general partnership, a Transfer of (A) any general partnership interest (except for a Transfer to a Qualified REIT Subsidiary, as defined in Section 856(i)(2) of the Internal Revenue Code of 1986, 100% owned by Apartment Investment and Management Company, a Maryland corporation or to a Qualified REIT Subsidiary, as defined in Section 856 (l)(1) of the Internal Revenue Code of 1986, 100% owned by AIMCO OP), or (B) other interests in Borrower that would cause the Initial Owners of Borrower to own less than 51% of all partnership interests in Borrower;

W.

New Sections 21(b)(7), 21(b)(8), 21(b)(9), and 21(b)(10) are added, as follows:

(7)

The Transfer of any joint venture partnership interests in Borrower provided no Change of Control occurs as a result of such Transfer.

(8)

The Transfer of shares of common stock, limited partnership interests or other beneficial or ownership interests or other forms of securities in AIMCO REIT or AIMCO OP, and the issuance of all varieties of convertible debt, equity and other similar securities of AIMCO REIT or AIMCO OP, and the subsequent Transfer of such securities; provided, however, that no Change of Control occurs as a result of such Transfer, either upon such Transfer or upon the subsequent conversion to equity of such convertible debt or other securities.

(9)

The issuance by AIMCO REIT or AIMCO OP of additional common stock, limited partnership interests or other beneficial or ownership interests, convertible debt, equity and other similar securities, and the subsequent Transfer of such convertible debt or securities; provided, however, that no Change of Control occurs as the result of such Transfer, either upon such Transfer or upon the subsequent conversion to equity of such convertible debt or other securities.

(10)

So long as AIMCO REIT owns 100% of the stock of AIMCO-LP, Inc., a Transfer of limited partnership interests that results in AIMCO-LP, Inc. owning not less than 50.1% of the limited partnership interests in AIMCO OP.

X.

Section 21(b)(8) shall apply only to a Transfer of an interest in a Controlling Entity that is prohibited by Section 21(a)(7).

Y.

A new Section 21(d) is added, as follows:

(d)

For purposes of this Section 21, the following terms shall be defined as follows:

(1)

"Change of Control" shall mean the earliest to occur of (A) the date an Acquiring Person becomes (by acquisition, consolidation, merger or otherwise), directly or indirectly, the beneficial owner of more than forty percent (40%) of the total Voting Equity Capital of AIMCO REIT then outstanding, or (B) the date on which AIMCO REIT shall cease to hold (whether directly or indirectly through a wholly owned intermediary entity such as AIMCO-LP, Inc. or AIMCO-GP, Inc.) at least 50.1% of the limited partnership interests in AIMCO OP, or (C) the date on which AIMCO REIT shall cease for any reason to hold (whether directly or indirectly) (i) the interests in the Joint Venture Partners held as of the

date of this Instrument (as evidenced by organizational charts and documents submitted to Lender as of such date) and (ii) the Controlling Interest(s) in the Borrower, or (D) the replacement (other than solely by reason of retirement at age sixty-five or older, death or disability) of more than 50% (or such lesser percentage as is required for decisionmaking by the board of directors of trustees, if applicable) of the members of the board of directors (or trustee, if applicable) of AIMCO REIT over a one-year period where such replacement shall not have been approved by a vote of at least a majority of the board of directors (or trustees, if applicable) of AIMCO REIT then still in office who either were members of such board of directors (or trustees, if applicable) at the beginning of such one year period or whose election as members of the board of directors (or trustees, if applicable) was previously so approved.

(2)

"Acquiring Person" shall mean a "person" or group of "persons" within the meaning of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended.  However, notwithstanding the foregoing, “Acquiring Person” shall not be deemed to include any member of the Borrower Control Group unless such member has, directly or indirectly, disposed of, sold or otherwise transferred to, or encumbered or restricted (whether by means of voting trust agreement or otherwise) for the benefit of an Acquiring Person, all or any portion of the Voting Equity Capital of AIMCO REIT directly or indirectly owned or controlled by such member or such member directly or indirectly votes all or any portion of the Voting Equity Capital of AIMCO REIT, directly or indirectly, owned or controlled by such member for the taking of any action which, direc tly or indirectly constitutes or would result in a Change of Control, in which event such member of the Borrower Control Group shall be deemed to constitute an Acquiring Person to the extent of the Voting Equity Capital of AIMCO REIT owned or controlled by such member.

(3)

"Borrower Control Group" shall mean Terry Considine, Peter K. Kompaniez, Richard S. Ellwood, J. Landis Martin, Thomas L. Rhodes and James N. Bailey.

(4)

A "Person" shall mean an individual, an estate, a trust, a corporation, a partnership, a limited liability company or any other organization or entity (whether governmental or private).

(5)

"Security" shall have the same meaning as in Section 2(1) of the Securities Act of 1933, as amended.

(6)

"Controlling Interest(s)" shall mean (i) with respect to a partnership, such majority and/or managing general partner interests which, together with a majority of limited partnership interests if necessary for consent purposes, vest in the holder of such interests the sole power, right and authority to control the day to day operations of the Borrower; including, without limitation, the authority to manage, operate and finance the Mortgaged Property, (ii) with respect to a corporation, the number of shares which entitle the holder to elect a majority of the board of directors of the Borrower, and (iii) with respect to a limited liability company, such majority and/or managing member interests as vest in the holder of such interests the sole power, right and authority to control the day to day operations of the Borrower; including, without limitation, the authority to manage, operate and finance the Mortgaged Property.

(7)

"AIMCO REIT" shall mean Apartment Investment and Management Company, a corporation organized and existing under the laws of the State of Maryland.

(8)

"AIMCO OP" shall mean AIMCO Properties, L.P., a limited partnership organized and existing under the laws of the State of Delaware.

(9)

"Joint Venture Partners" shall mean the entities executing this Instrument on behalf of the Borrower and/or its successors or assigns in interest.

(10)

“Voting Equity Capital” shall mean Securities of any class or classes, the holders of which are ordinarily, in the absence of contingencies, entitled to elect a majority of the board of directors (or Persons performing similar functions).

V.

Section 22(a) is modified to read as follows:

(a)

any failure by Borrower to pay or deposit (i) any Imposition Deposit within three days after it is due, or (ii) any other amount required by the Note, this Instrument, or any other Loan Document when due.

W.

Section 28 shall obligate Borrower to provide such further assurances as Lender reasonably may require.

X.

The words "Except as otherwise disclosed to Lender in writing, before the date of this Instrument" are added at the beginning of the second sentence of Section 41.

Y.

Section 37 is modified by adding: “; provided, however, that in the event of a Transfer, any or some or all of the Modifications to Instrument set forth in Exhibit B (if any) may be modified or rendered void by Lender at Lender’s option by notice to Borrower/transferee”.  The modifications set forth in this Exhibit B shall be null and void unless title to the Mortgaged Property is vested in an entity whose Controlling Interest(s) are directly or indirectly held by AIMCO REIT or AIMCO OP.

INITIALS

EX-10

EXHIBIT 10.50

Chappelle Le Grande Apartments

MULTIFAMILY NOTE

(VARIABLE LOAN)

US $3,204,772.00

As of January 18, 2007

FOR VALUE RECEIVED, the undersigned (“Borrower”) promises to pay to the order of CAPMARK FINANCE INC., a California corporation, the principal sum of Three Million Two Hundred Four Thousand Seven Hundred Seventy-Two and 00/100 Dollars (US $3,204,772.00), with interest on each Variable Loan at an annual rate as calculated in Section 3 hereof.

This Note is executed and delivered by Borrower pursuant to one of either (i) that certain Amended and Restated Loan Agreement, dated as of September 16, 2002, by and among certain borrowers signatory thereto and Lender or (ii) that certain Loan Agreement dated as of November 1, 2002, by and among certain borrowers signatory thereto and Lender.  As used herein, the term “Loan Agreement” shall mean whichever of the loan agreements described in the preceding sentence shall apply from time to time in accordance with their respective terms, along with all amendments, supplements, replacements, restatements or other modifications thereto or thereof from time to time made.  The Loan Agreement shall evidence the obligation of Borrower to repay a Variable Loan made by Lender to Borrower in accordance with the terms of the Loan Agreement.  This Note is entitled to the benef it and security of the Loan Documents provided for in the Loan Agreement, to which reference is hereby made for a statement of all of the terms and conditions under which the Variable Loan evidenced hereby is made.  The Loan Agreement requires certain of the terms of each Variable Loan to be evidenced by one or a series of Loan Confirmation Instruments, and reference is hereby made to each such Loan Confirmation Instrument for such terms.

1.

Defined Terms.  As used in this Note, (i) the term “Lender” means the holder of this Note, and (ii) the term “Indebtedness” means the principal of, interest on, or any other amounts due at any time under, this Note, the Security Instrument or any other Loan Document, including prepayment premiums, late charges, default interest, and advances to protect the security of the Security Instrument under Section 12 of the Security Instrument.  Event of Default and other capitalized terms used but not defined in this Note shall have the meanings given to such terms in the Loan Agreement or, if not defined in the Loan Agreement, as defined in the Security Instrument (as defined in Paragraph 5).

2.

Address for Payment.  All payments due under this Note shall be payable at Capmark Finance Inc., 116 Welsh Road, Horsham, PA  19044 , Attention:  Servicing – Account Manager, or such other place as may be designated by written notice to Borrower from or on behalf of Lender.

3.

Payment of Principal and Interest.  Principal and interest shall be paid as follows:

(a)

This Note shall evidence a Variable Loan made from time to time under the Loan Agreement.  The Variable Loan shall bear interest at a rate determined in accordance with Section 2.01 of the Loan Agreement.

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(b)

Borrower shall pay imputed interest on each Variable Loan in advance in the form of a Discount in accordance with Section 1.04(b) of the Loan Agreement (except that Borrower shall pay actual interest on the Variable Loan for the partial month period, if any, in accordance with Section 1.04(a) of the Loan Agreement).  

(c)

Borrower shall make monthly payments of principal each in the amount as set forth on the attached Amortization Schedule.  Lender shall apply each such principal payment to the outstanding principal amount of the Loan on the Rollover Date next following receipt of any such payment.  If not sooner paid, the entire principal amount of the Variable Loan shall be due and payable on the earlier of (i) the termination of the Loan Agreement pursuant to subsection (e) of Section 1.02 thereof, (ii) the fifth anniversary (unless such date is extended pursuant to Section 1.07 of the Loan Agreement, in which case, the tenth anniversary) of the Initial Closing Date or (iii) the maturity date of any outstanding MBS, unless either (A) not less than five Business Days prior to the maturity date of the outstanding MBS, a Borrower has requested that the outstanding MBS be renewed wi th a new MBS or converted to a Fixed Loan to take effect on the maturity date of the outstanding MBS and such new MBS has been issued or conversion has occurred or (B) the MBS is automatically renewed, which automatic renewal shall occur in the event that a Borrower does not make the request set forth in subpart (iii)(A) above and does not give Lender notice not less than five Business days prior to the maturity date of the outstanding MBS that the Variable Loan related to such outstanding MBS shall be paid on the maturity date of such outstanding MBS (the “Maturity Date”).  Any MBS that is issued as a result of an automatic renewal of a maturing MBS as contemplated by subpart (iii)(B) above shall have a maturity date of three (3) months after the MBS Issue Date.  

(d)

In addition to payment of principal and the Discount, Borrower shall pay the Variable Loan Fee due on each Variable Loan in accordance with Section 1.04(b)(ii) of the Loan Agreement.

4.

Application of Payments.  If at any time Lender receives, from Borrower or otherwise, any amount applicable to the Indebtedness that is less than all amounts due and payable at such time, Lender may apply that payment to amounts then due and payable in any manner and in any order determined by Lender, in Lender’s discretion.  Borrower agrees that neither Lender’s acceptance of a payment from Borrower in an amount that is less than all amounts then due and payable nor Lender’s application of such payment shall constitute or be deemed to constitute either a waiver of the unpaid amounts or an accord and satisfaction.

5.

Security.  The Indebtedness is secured, among other things, by a multifamily mortgage, deed to secure debt or deed of trust dated as of the date of this Note (the “Security Instrument”) and reference is made to the Security Instrument for other rights of Lender concerning the collateral for the Indebtedness.

6.

Acceleration.  If an Event of Default has occurred and is continuing, the entire unpaid principal balance, any accrued interest, the prepayment premium payable under Paragraph 10, if any, and all other amounts payable under this Note and any other Loan Document shall at once become due and payable, at the option of Lender, without any additional notice to Borrower.  Lender may exercise this option to accelerate regardless of any prior forbearance.

7.

Late Charge.  If any monthly amount payable under this Note or under the Security Instrument or any other Loan Document is not received by Lender within 10 days after the amount is due, Borrower shall pay to Lender, immediately and without demand by Lender, a late charge equal to 5 percent of such amount.  Borrower acknowledges that its failure to make timely payments will cause Lender to incur additional expenses in servicing and processing the loan evidenced by this Note (the “Loan”), and that it is extremely difficult and impractical to determine those additional expenses.  Borrower agrees that the late charge payable pursuant to

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this Paragraph represents a fair and reasonable estimate, taking into account all circumstances existing on the date of this Note, of the additional expenses Lender will incur by reason of such late payment.  The late charge is payable in addition to, and not in lieu of, any interest payable at the Default Rate pursuant to Paragraph 8.

8.

Default Rate.  So long as any monthly installment or any other payment due under this Note remains past due for 30 days or more, interest under this Note shall accrue on the unpaid principal balance from the earlier of the due date of the first unpaid monthly installment or other payment due, as applicable, at a rate (the “Default Rate”) equal to the lesser of 4 percentage points above the rate stated in the first paragraph of this Note or the maximum interest rate which may be collected from Borrower under applicable law.  If the unpaid principal balance and all accrued interest are not paid in full on the Maturity Date, the unpaid principal balance and all accrued interest shall bear interest from the Maturity Date at the Default Rate.  Borrower also acknowledges that its failure to make timely payments will cause Lender to incur additional expenses in s ervicing and processing the Loan, that, during the time that any monthly installment or payment under this Note is delinquent for more than 30 days, Lender will incur additional costs and expenses arising from its loss of the use of the money due and from the adverse impact on Lender’s ability to meet its other obligations and to take advantage of other investment opportunities, and that it is extremely difficult and impractical to determine those additional costs and expenses.  Borrower also acknowledges that, during the time that any monthly installment or payment due under this Note is delinquent for more than 30 days, Lender’s risk of nonpayment of this Note will be materially increased and Lender is entitled to be compensated for such increased risk.  Borrower agrees that the increase in the rate of interest payable under this Note to the Default Rate represents a fair and reasonable estimate, taking into account all circumstances existing on the date of this Note, of the additional costs and expenses Lender will incur by reason of Borrower’s delinquent payment and the additional compensation Lender is entitled to receive for the increased risks of nonpayment associated with a delinquent loan.

9.

Limits on Personal Liability.

(a)

Except as otherwise provided in this Paragraph 9, Borrower shall have no personal liability under this Note, the Security Instrument or any other Loan Document for the repayment of the Indebtedness or for the performance of any other obligations of Borrower under the Loan Documents, and Lender’s only recourse for the satisfaction of the Indebtedness and the performance of such obligations shall be Lender’s exercise of its rights and remedies with respect to the Mortgaged Property and any other collateral held by Lender as security for the Indebtedness.  This limitation on Borrower’s liability shall not limit or impair Lender’s enforcement of its rights against any guarantor of the Indebtedness or any guarantor of any obligations of Borrower.

(b)

Borrower shall be personally liable to Lender for the repayment of a portion of the Indebtedness equal to any loss or damage suffered by Lender as a result of (1) failure of Borrower to pay to Lender upon demand after an Event of Default, all Rents to which Lender is entitled under Section 3(a) of the Security Instrument and the amount of all security deposits collected by Borrower from tenants then in residence; (2) failure of Borrower to apply all insurance proceeds and condemnation proceeds as required by the Security Instrument; (3) failure of Borrower to comply with Section 14(d) or (e) of the Security Instrument relating to the delivery of books and records, statements, schedules and reports; (4)  fraud or written material misrepresentation by Borrower or any officer, director, partner, member or employee of Borrower in connection with the application for or creation of the Indebtedn ess or any request for any action or consent by Lender; or (5) failure to apply Rents, first, to the payment of reasonable operating expenses (other than Property management fees that are not currently payable pursuant to the terms of an Assignment of Management Agreement or any other agreement with Lender executed in connection with the Loan) and then to amounts  (“Debt

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Service Amounts”) payable under this Note, the Security Instrument or any other Loan Document (except that Borrower will not be personally liable (i) to the extent that Borrower lacks the legal right to direct the disbursement of such sums because of a bankruptcy, receivership or similar judicial proceeding, or (ii) with respect to Rents that are distributed in any calendar year if Borrower has paid all operating expenses and Debt Service Amounts for that calendar year).

(c)

Borrower shall become personally liable to Lender for the repayment of all of the Indebtedness upon the occurrence of any of the following Events of Default: (1) Borrower’s acquisition of any property or operation of any business not permitted by Section 33 of the Security Instrument; or (2) a Transfer that is an Event of Default under Section 21 of the Security Instrument.

(d)

To the extent that Borrower has personal liability under this Paragraph 9, Lender may exercise its rights against Borrower personally without regard to whether Lender has exercised any rights against the Mortgaged Property or any other security, or pursued any rights against any guarantor, or pursued any other rights available to Lender under this Note, the Security Instrument, any other Loan Document or applicable law. For purposes of this Paragraph 9, the term “Mortgaged Property” shall not include any funds that (1) have been applied by Borrower as required or permitted by the Security Instrument prior to the occurrence of an Event of Default, or (2) Borrower was unable to apply as required or permitted by the Security Instrument because of a bankruptcy, receivership, or similar judicial proceeding.

10.

Voluntary and Involuntary Prepayments.  Pursuant to the terms of the Loan Agreement, Borrower shall pay the entire amount of the Discount on any Variable Loan in advance.  Accordingly, any Variable Loan may be prepaid in whole or in part and at any time without penalty.  Borrower shall give Lender six (6) Business Days advance notice of any prepayment.

11.

Costs and Expenses.  Borrower shall pay on demand all reasonable expenses and costs, including reasonable fees and out-of-pocket expenses of attorneys and expert witnesses and costs of investigation, incurred by Lender as a result of any default under this Note or in connection with efforts to collect any amount due under this Note, or to enforce the provisions of any of the other Loan Documents, including those incurred in post-judgment collection efforts and in any bankruptcy proceeding (including any action for relief from the automatic stay of any bankruptcy proceeding) or judicial or non-judicial foreclosure proceeding.

12.

Forbearance.  Any forbearance by Lender in exercising any right or remedy under this Note, the Security Instrument, or any other Loan Document or otherwise afforded by applicable law, shall not be a waiver of or preclude the exercise of that or any other right or remedy.  The acceptance by Lender of any payment after the due date of such payment, or in an amount which is less than the required payment, shall not be a waiver of Lender’s right to require prompt payment when due of all other payments or to exercise any right or remedy with respect to any failure to make prompt payment.  Enforcement by Lender of any security for Borrower’s obligations under this Note shall not constitute an election by Lender of remedies so as to preclude the exercise of any other right or remedy available to Lender.

13.

Waivers.  Except as expressly provided in the Loan Agreement, presentment, demand, notice of dishonor, protest, notice of acceleration, notice of intent to demand or accelerate payment or maturity, presentment for payment, notice of nonpayment, grace, and diligence in collecting the Indebtedness are waived by Borrower and all endorsers and guarantors of this Note and all other third party obligors.

14.

Loan Charges.  If any applicable law limiting the amount of interest or other charges permitted to be collected from Borrower in connection with the Loan is interpreted so

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that any interest or other charge provided for in any Loan Document, whether considered separately or together with other charges provided for in any other Loan Document, violates that law, and Borrower is entitled to the benefit of that law, that interest or charge is hereby reduced to the extent necessary to eliminate that violation.  Borrower agrees to an effective rate of interest that is the stated rate of interest plus any additional rate of interest resulting from any other charges or fees that are to be paid by Borrower to Lender that may be found by a court of competent jurisdiction to be interest.  The amounts, if any, previously paid to Lender in excess of the permitted amounts shall be applied by Lender to reduce the unpaid principal balance of this Note.  For the purpose of determining whether any applicable law limiting the amount of intere st or other charges permitted to be collected from Borrower has been violated, all Indebtedness that constitutes interest, as well as all other charges made in connection with the Indebtedness that constitute interest, shall be deemed to be allocated and spread ratably over the stated term of the Note.  Unless otherwise required by applicable law, such allocation and spreading shall be effected in such a manner that the rate of interest so computed is uniform throughout the stated term of the Note.

15.

Commercial Purpose.  Borrower represents that the Indebtedness is being incurred by Borrower solely for the purpose of carrying on a business or commercial enterprise, and not for personal, family or household purposes.

16.

Counting of Days.  Except where otherwise specifically provided, any reference in this Note to a period of “days” means calendar days, not Business Days.

17.

Governing Law; Consent to Jurisdiction; WAIVER OF JURY TRIAL.  The provisions of Section 11.07 of the Loan Agreement (entitled “Choice of Law; Consent to Jurisdiction; Waiver of Jury Trial”) are hereby incorporated into this Note by this reference to the fullest extent as if the text of such Section were set forth in its entirety herein.

18.

Captions.  The captions of the paragraphs of this Note are for convenience only and shall be disregarded in construing this Note.

19.

Notices.  All notices, demands and other communications required or permitted to be given by Lender to Borrower pursuant to this Note shall be given in accordance with Section 11.09 of the Loan Agreement.

20.

Security for this Note.  Reference is made hereby to the Loan Agreement and the Security Documents for additional rights and remedies of Lender relating to the indebtedness evidenced by this Note.  Each Security Document shall be released in accordance with the provisions of the Security Documents.

21.

Loan May Not Be Reborrowed.  Borrower may not re-borrow any amounts under this Note which it has previously borrowed and repaid under this Note.

22.

Default Under Loan Agreement and Other Loan Documents.  The occurrence of an Event of Default under the Loan Agreement or the Security Instrument shall constitute an “Event of Default” under this Note in accordance with the Loan Agreement and the Security Instrument.  Upon the occurrence of an Event of Default under the Loan Agreement or the Security Instrument, the entire principal amount outstanding hereunder and accrued interest thereon shall at once become due and payable, at the option of the holder hereof.

23.

Loan Confirmation Instruments; Accounting for Variable Loans.  The terms of the Loan Agreement and this Note govern the repayment, and all other terms relating to the Variable Loan.  However, Borrower shall execute a Loan Confirmation Instrument to create a physical instrument evidencing each MBS issued to fund the Variable Loan.  The Loan Confirmation Instrument executed by Borrower in accordance with Section 2.02 of the Loan

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Agreement shall set forth the amount, term, Discount, Closing Date and certain other terms of each MBS issued to fund the Variable Loan.  The Loan Confirmation Instrument shall conclusively establish each of the terms described in the preceding sentence, absent manifest error.  The MBS evidenced by the Loan Confirmation Instrument does not represent a separate indebtedness from that evidenced by this Note.   In making proof of this Note, no other documents other than this Note shall be required.  In making proof of the amount and terms of the outstanding Variable Loans under this Note, this Note, the related Loan Confirmation Instruments, and Lender’s records concerning payments made by Borrower under this Note, shall be conclusive evidence of the terms and outstanding amounts of the Variable Loan, absent manifest error.

24.

Modifications to Note.  There are standard modifications to this Note that are attached as Exhibit B-1 and Exhibit B-2 hereto.  In addition, there may be special modifications to this Note attached as Exhibit B-3 hereto.  All such exhibits are hereby incorporated into this Note as a part hereof.

IN WITNESS WHEREOF, Borrower has signed and delivered this Note under seal or has caused this Note to be signed and delivered under seal by its duly authorized representative.  Borrower intends that this Note shall be deemed to be signed and delivered as a sealed instrument.

[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]

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VMS NATIONAL PROPERTIES, an Illinois joint venture general partnership

By:  VMS National Residential Portfolio I, an Illinois limited partnership, its joint venture partner

By:  Maeril, Inc., a Delaware corporation, its general partner

By:  /s/Patti K. Fielding

Patti K. Fielding

Executive Vice President and Treasurer

By:  VMS National Residential Portfolio II, an Illinois limited partnership, its joint venture partner

By:  Maeril, Inc., a Delaware corporation, its general partner

By:  /s/Patti K. Fielding

Patti K. Fielding

Executive Vice President and Treasurer

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Pay to the order of Fannie Mae, without recourse.

CAPMARK FINANCE INC., a California corporation

      By:      /s/Max W. Foore

Name: Max W. Foore

Title:   President

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EXHIBIT B-1

GMACCM LOAN AGREEMENT MODIFICATIONS

During any time that the terms, covenants and provisions of that certain Loan Agreement dated as of November 1, 2002 and more particularly described in the second paragraph on page 1 of the Note apply to the Variable Loan evidenced by the Note, paragraphs 3 and 23 of the Note are amended and replaced with the following substitute paragraphs 3 and 23:

“3.

Payment of Principal and Interest.  Principal and interest shall be paid as follows:

(a)

This Note shall evidence a Variable Loan made from time to time under the Loan Agreement.  Borrower shall not be required to make monthly principal payments prior to the Fannie Mae Addition Date, but shall make monthly payments of principal after the Fannie Mae Reassignment Date, if it occurs, as set forth in Section 1.04(d) of the Loan Agreement.

(b)

Borrower shall pay actual interest on the Variable Loan during the period described in accordance with Section 1.04(a) of the Loan Agreement.  Borrower shall pay interest on its Variable Rate Loan in arrears at a rate equal to LIBOR Rate plus a number of basis points determined in accordance with Section 2.01 of the Loan Agreement.  For purposes of the previous sentence, the LIBOR Rate shall be reset every ninety (90) days commencing on the date that is ninety (90) days after the Initial Closing Date.  On the date the Variable Loan is funded, Borrower shall pay interest in advance from the date of funding through January 31, 2007.  On March 1, 2007 and on the first (1st) day of each calendar month thereafter, Borrower shall pay interest in arrears calculated for the actual number of days since the first (1st) day of the previous calendar month.

(c)

If not sooner paid, the entire principal amount of the Variable Loan shall be due and payable in accordance with Section 1.02 of the Loan Agreement.  

(d)

Borrower shall not pay any Discount.

23.

Loan Confirmation Instruments; Accounting for Variable Loans.  The terms of the Loan Agreement and this Note govern the repayment, and all other terms relating to the Variable Loan.  However, Borrower shall execute one or a series of Loan Confirmation Instruments to create a physical instrument evidencing the terms of the Variable Loan.  The Loan Confirmation Instrument or series of Loan Confirmation Instruments executed by Borrower in accordance with Section 2.02 of the Loan Agreement shall set forth the amount, term, the interest rate spread over the LIBOR Rate Closing Date and certain other terms related to the funding the Variable Loan.  The Loan Confirmation Instrument shall conclusively establish each of the terms described in the preceding sentence, absent manifest error.  The variable terms evidenced by the Loan Confirmation Instrument do not represe nt a separate indebtedness from that evidenced by this Note.   In making proof of this Note, no other documents other than this Note shall be required.  In making proof of the amount and terms of the outstanding Variable Loans under this Note, this Note, the related Loan Confirmation Instruments, and Lender’s records concerning payments made by Borrower under this Note, shall be conclusive evidence of the terms and outstanding amounts of the Variable Loan, absent manifest error.”

During any time that the terms, covenants and provisions of that certain Amended and Restated Loan Agreement dated as of September 16, 2002 and more particularly described in the second paragraph on page 1 of the Note apply to the Variable Loan evidenced by the Note, this Exhibit B-1 shall not apply and paragraphs 3 and 23 of the Note shall not be amended or replaced with the provisions set forth in this Exhibit B-1.

B-1

EXHIBIT B-2

AIMCO MODIFICATIONS

The following modifications are made to the text of the Note that precedes this Exhibit:

1.

Section 9(b)(4) is modified by deleting “or” at the end thereof.

2.

Section 9(b)(5) is modified to read as follows:

“(5) failure to apply Rents, first, to the payment of reasonable operating expenses (other than Property management fees that are not currently payable pursuant to the terms of an Assignment of Management Agreement or any other agreement with Lender executed in connection with the Loan) and then to amounts (“Debt Service Amounts”) payable under this Note, the Security Instrument or any other Loan Document (except that Borrower will not be personally liable (i) to the extent that Borrower lacks the legal right to direct the disbursement of such sums because of a bankruptcy, receivership or similar judicial proceeding, or (ii) with respect to Rents that are distributed in any calendar quarter if Borrower has paid all operating expenses and Debt Service Amounts for such calendar quarter to date); or”

3.

A new Section 9(b)(6) is added following Section 9(b)(5), stating as follows:

“(6) failure to pay when due any water and sewer charges, fire, hazard or other insurance premiums and ground rents owing from time to time in connection with the Mortgaged Property.”

B-2

EX-10

EXHIBIT 10.51

Chappelle Le Grande Apartments

GUARANTY

This Guaranty (the “Guaranty”) is made and entered into as of the 18^th day of January, 2007 by AIMCO PROPERTIES, L.P., a Delaware limited partnership (the “Guarantor”), for the benefit of CAPMARK FINANCE INC., a California corporation (“Lender”).

RECITALS

A.

Lender has agreed to execute both (i) that certain Amended and Restated Loan Agreement, dated as of September 16, 2002, by and among AIMCO Properties, L.P., a Delaware limited partnership, certain borrowers signatory thereto and Lender and (ii) that certain Loan Agreement dated as of November 1, 2002, by and among certain borrowers signatory thereto and Lender (as amended, supplemental or otherwise modified or amended and restated from time to time, the “Loan Agreement”),  pursuant to which, inter alia, Lender has agreed, subject to the terms, conditions and limitations of the Loan Agreement, to make a loan to VMS National Properties, an Illinois joint venture general partnership (the “Borrower”) from time to time loan to be evidenced by the Note (the “Loan”).  Terms used herein not defined herein have the definition given them in the Loan Agreement.

B.

The repayment of the Loan and all of the Obligations of the Borrower under the Loan Agreement or the other Loan Documents are guaranteed by this Guaranty to the extent of Borrower’s personal liability as provided in Section 9 of the Note evidencing the Loan, and except for such obligations described herein, Guarantor shall have no liability in connection with, or responsibility to perform, under or in accordance with the Loan Agreement or other Loan Documents.

C.

Guarantor owns, directly or indirectly, an ownership interest in the Borrower and will receive a direct and material benefit from the Loans to the Borrower.

D.

Lender is willing to make the Loan to the Borrower only if Guarantor agrees to enter into this Guaranty.

NOW, THEREFORE, in order to induce Lender to make the Loan to Borrower, and in consideration thereof, Guarantor hereby agrees as follows:

Section 1.

Definitions.  All capitalized terms used but not defined in this Guaranty shall have the meanings ascribed to such terms in the Loan Agreement.  The following terms shall have the meaning set forth below for purposes of this Guaranty:

“Material Adverse Effect” means, with respect to any circumstance, act, condition or event of whatever nature (including any adverse determination in any litigation, arbitration, or governmental investigation or proceeding), whether singly or in conjunction with any other event or events, act or acts, condition or conditions, or circumstance or circumstances, whether or not related, a material adverse change in or a materially adverse effect upon the present or future ability of the Guarantor, to the extent specifically referred to in the applicable provision of that Guaranty, to perform the Guaranteed Obligations.

“Net Worth” means, as of any date of determination and without double counting any item, the sum of the capital stock or other capital equity interests and additional paid-in capital

1

plus retained earnings (or minus accumulated deficits) of the Guarantor, the REIT and their respective Subsidiaries on a consolidated basis determined in conformity with GAAP.

“REIT” means Apartment Investment and Management Company, a Maryland corporation.

“Subsidiary” means, with respect to the REIT, the Guarantor or an Affiliate of either of them, a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise controlled, directly or indirectly, through one or more intermediaries, or both, by the REIT, the Guarantor or an Affiliate of either of them.

Section 2.

Guaranty of Payment.  Guarantor irrevocably, absolutely and unconditionally guarantees to Lender all of the following (collectively, the “Guaranteed Obligations”):  the due and punctual payment when due, whether at maturity or earlier, by reason of acceleration or otherwise, at all times, of all amounts for which Borrower is personally liable under Section 9 of the Note.

This Guaranty shall be an unconditional guaranty of payment and performance and not of collection, and is in no way conditioned upon any attempt by Lender to pursue or exhaust any remedy against Borrower.  This Guaranty is a continuing guaranty which shall remain in full force and effect until all of the Guaranteed Obligations have been paid and performed in full; and Guarantor shall not be released from any obligations to Lender under this Guaranty as long as any amount payable by the Borrower to Lender, or any obligation by the Borrower, under the Loan Documents is not performed, satisfied, settled or paid in full.

Section 3.

Form of Payment.  All payments under this Guaranty shall be made to Lender in immediately available funds, without reduction by any recoupment, set-off, counterclaim or cross-claim against Lender.

Section 4.

Guarantor’s Obligations are Absolute.  The obligations of Guarantor under this Guaranty shall be absolute and unconditional, shall not be subject to any counterclaim, set-off, recoupment, deduction, or defense based upon any claim Guarantor may have against Lender or Borrower and shall remain in full force and effect without regard to, and shall not be released, discharged or terminated or in any other way affected by, any circumstance or condition (whether or not Guarantor shall have any knowledge or notice thereof), including, without limitation:

(a)

any amendment or modification of, or extension of time for payment of any of the principal of, interest on or other amounts payable under the Loan Documents;

(b)

any exercise or non-exercise by Lender of any right, power or remedy under or in respect of the Loan Documents, or any waiver, consent, forbearance, indulgence or other action, inaction or omission by Lender under or in respect of the Loan Documents;

(c)

any assignment, sale or other transfer of Borrower’s interest in all or any part of the real or personal property which at any time constitutes collateral for the payment of the Guaranteed Obligations, including, without limitation, a conveyance of such property by Borrower to Lender by deed in lieu of foreclosure;

(d)

any bankruptcy, insolvency, reorganization, adjustment, dissolution, liquidation or other like proceeding involving or affecting Borrower or Lender or their respective properties or

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creditors, or any action taken with respect to the Loan Documents by any trustee or receiver of Borrower or Lender, or by any court, in any such proceeding;

(e)

any invalidity or unenforceability, in whole or in part, of any term or provision of the Loan Documents or Borrower’s incapacity or lack of authority to enter into the Loan Documents;

(f)

any release, compromise, settlement or discharge with respect to all or any portion of Borrower’s obligations under the Loan Documents;

(g)

any acceptance of additional or substituted collateral for payment of the Guaranteed Obligations or any release or subordination of any collateral held at any time by Lender as security for the payment of the Guaranteed Obligations; or

(h)

any resort to Guarantor for payment of all or any portion of the Guaranteed Obligations, whether or not Lender shall have resorted to any collateral securing the Guaranteed Obligations, if any, or shall have proceeded to pursue or exhaust its remedies against Borrower (or any other Person) primarily or secondarily liable for the Guaranteed Obligations.

No exercise, delay in exercise or non-exercise by Lender of any right hereby given it, no dealing by Lender with Borrower, Guarantor or any other Person, no change, impairment or suspension of any right or remedy of Lender, and no act or thing which, but for this provision, could act as a release or exoneration of the liabilities of Guarantor hereunder, shall in any way affect, decrease, diminish or impair any of the obligations of Guarantor hereunder or give Guarantor or any other Person any recourse or defense against Lender.

Section 5.

Waiver.  Guarantor unconditionally waives the following:

(a)

notice of acceptance of this Guaranty and notice of any of the matters referred to in Section 4 hereof;

(b)

all notices which may be required by statute, rule of law or otherwise to preserve intact any rights which Lender may have against Guarantor under this Guaranty, including, without limitation, any demand, proof or notice of non-payment of any of the principal of, interest on or other amounts payable under the Loan Documents, and notice of any failure on the part of Borrower to perform and comply with any covenant, agreement, term or condition of the Loan Documents;

(c)

any right to the enforcement, assertion or exercise of any right, power or remedy conferred upon Lender in the Loan Documents or otherwise;

(d)

any requirement that Lender act with diligence in enforcing its rights under the Loan Documents or this Guaranty;

(e)

any right to require Lender to proceed against or exhaust its recourse against Borrower or any security or collateral held by Lender, if any, at any time for the payment of the Guaranteed Obligations or to pursue any other remedy in its power before being entitled to payment from Guarantor under this Guaranty or before proceeding against Guarantor;

(f)

any failure by Lender to file or enforce a claim against the estate (either in administration, bankruptcy or any other proceeding) of Borrower or any other Person;

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(g)

any defense based upon an election of remedies by Lender which destroys or otherwise impairs the subrogation rights of Guarantor or the right of Guarantor (after payment of the Guaranteed Obligations) to proceed against Borrower for reimbursement, or both;

(h)

any defense based upon any taking, modification or release of any collateral for the Guaranteed Obligations, if any, or any failure to perfect any security interest in, or the taking of, or failure to take any other action with respect to, any collateral securing payment of the Guaranteed Obligations, if any;

(i)

any defense based upon the addition, substitution or release, in whole or in part, of any Person(s), including, without limitation, another guarantor, primarily or secondarily liable for or in respect of the Guaranteed Obligations;

(j)

any rights or defenses based upon an offset by Guarantor against any obligation now or hereafter owed to Guarantor by Borrower; and

(k)

all other notices which may or might be lawfully waived by Guarantor;

it being the intention hereof that Guarantor shall remain liable as principal, to the extent set forth in this Guaranty, until the payment and performance in full of the Guaranteed Obligations, notwithstanding any act, omission or thing which might otherwise operate as a legal or equitable discharge of Guarantor other than the payment and performance in full of the Guaranteed Obligations.  No delay by Lender in exercising any rights and/or powers hereunder or in taking any action to enforce Borrower’s obligations under the Loan Documents shall operate as a waiver as to such rights or powers or in any manner prejudice any and all of Lender’s rights and powers hereunder against Guarantor.  The intention of Guarantor under this Guaranty is that, so long as any of the Guaranteed Obligations remains unsatisfied, the obligations of Guarantor hereunder shall not be discharged except by performance and then only to the extent of such performance.  Guarantor agrees that Guarantor’s obligations hereunder shall not be affected by any circumstances, whether or not referred to in this Guaranty, which might constitute a legal or equitable discharge of a surety or guarantor.

Section 6.

Election of Remedies.  This Guaranty may be enforced from time to time, as often as occasion therefor may arise, and without any requirement that Lender must first pursue or exhaust any remedies available to it against Borrower under the Loan Documents or against any other Person or resort to any collateral at any time held by it for performance of the Guaranteed Obligations, if any, or any other source or means of obtaining payment of any of the Guaranteed Obligations.

Section 7.

Representations and Warranties of Guarantor.  Guarantor hereby represents and warrants to the Lender as follows:

(a)

Due Organization; Qualification.  Guarantor is qualified to transact business and is in good standing in the State in which it is organized and in each other jurisdiction in which such qualification and/or standing is necessary to the conduct of its business and where the failure to be so qualified would adversely affect the validity of, the enforceability of, or the ability of Guarantor to perform the Guaranteed Obligations.

(b)

Power and Authority.  Guarantor has the requisite power and authority (i) to own its properties and to carry on its business as now conducted and as contemplated to be conducted in connection with the performance of the Guaranteed Obligations, and (ii) to execute and deliver this Guaranty and to carry out the transactions contemplated by this Guaranty.

(c)

Due Authorization.  The execution, delivery and performance of this Guaranty has been duly authorized by all necessary action and proceedings by or on behalf of Guarantor,

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and no further approvals or filings of any kind, including any approval of or filing with any Governmental Authority, are required by or on behalf of Guarantor as a condition to the valid execution, delivery and performance by Guarantor of this Guaranty.

(d)

Valid and Binding Obligations.  This Guaranty has been duly authorized, executed and delivered by Guarantor and constitutes the legal, valid and binding obligations of Guarantor, enforceable against Guarantor in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles affecting the enforcement of creditors’ rights generally or by equitable principles or by the exercise of discretion by any court.

(e)

Non-contravention: No Liens.  Neither the execution and delivery of this Guaranty, nor the fulfillment of or compliance with the terms and conditions of this Guaranty nor the payment or performance of the Guaranteed Obligations:

(i)

does or will conflict with or result in any breach or violation of any Applicable Law enacted or issued by any Governmental Authority or other agency having jurisdiction over Guarantor, any of the Mortgaged Properties or any other portion of the Collateral or assets of Guarantor, or any judgment or order applicable to Guarantor or to which Guarantor is subject;

(ii)

does or will conflict with or result in any material breach or violation of, or constitute a default under, any of the terms, conditions or provisions of Guarantor’s Organizational Documents, any indenture, existing agreement or other instrument to which Guarantor is a party or to which Guarantor, any of the Mortgaged Properties or any other portion of the Collateral or other assets of Guarantor is subject; or

(iii)

does or will require the consent or approval of any creditor of Guarantor, any Governmental Authority or any other Person except such consents or approvals which have already been obtained.

(f)

Pending Litigation or Other Proceedings.  Since the date of the most recent financial statements delivered to Lender pursuant to Section 8(b) of this Guaranty, there is no pending or, to the best knowledge of guarantor, threatened action, suit, proceeding or investigation, at law or in equity, before any court, board, body or official of any Governmental Authority or arbitrator which, if decided adversely to Guarantor, would have, or may reasonably be expected to have, a Material Adverse Effect on Guarantor. Guarantor is not in default with respect to any order of any Governmental Authority to any extent which would have, or may reasonably be expected to have, a Material Adverse Effect on Guarantor.

(g)

Solvency.  Guarantor is not insolvent and will not be rendered insolvent by the transaction contemplated by this Guaranty and after giving effect to such transaction, Guarantor will not be left with an unreasonably small amount of capital with which to engage in its business or undertakings, nor will Guarantor have incurred, have intended to incur, or believe that it has incurred, debts beyond its ability to pay such debts as they mature. Guarantor did not receive less than a reasonably equivalent value in exchange for incurrence of the Guaranteed Obligations.  There (i) is no contemplated, pending or, to the best of Guarantor’s knowledge, threatened bankruptcy, reorganization, receivership, insolvency or like proceeding, whether voluntary or involuntary, affecting Guarantor and (ii) has been no assertion or exercise of jurisdiction over Guarantor by any court empowered to exercise bankruptcy powers.

(h)

No Contractual Defaults.  There are no material defaults by Guarantor or, to the knowledge of Guarantor, by any other Person under any contract to which Guarantor is a party other than defaults which do not have, and are not reasonably be expected to have, a Material Adverse Effect on Guarantor.  Neither Guarantor nor, to the knowledge of Guarantor, any other

5

Person, has received notice or has any knowledge of any existing circumstances in respect of which it could receive any notice of default or breach in respect of any contracts, which default would have, or which may reasonably be expected to have, a Material Adverse Effect on Guarantor.

(i)

Representations True and Correct.  The representations and warranties made by Guarantor in this Guaranty are true, complete and correct in all material respects as of the Initial Closing Date and do not contain any untrue statement of material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.

(j)

ERISA.  Guarantor is in compliance in all material respects with all applicable provisions of ERISA and has not incurred any liability to the PBGC on a Plan under Title LV of ERISA.  None of the assets of Guarantor constitute plan assets (within the meaning of Department of Labor Regulation § 2510.3-101) of any employee benefit plan subject to Title I of ERISA.

(k)

Financial Information.  The financial statements of Guarantor which have been furnished to the Lender are complete and accurate in all material respects and present fairly the financial condition of Guarantor, as of its date in accordance with GAAP, applied on a consistent basis.  Since the date of the most recent of such financial statements no event has occurred which would have, or may reasonably be expected to have a Material Adverse Effect on Guarantor, except as disclosed in any filings made by Guarantor or its affiliates with the United States Securities and Exchange Commission (“SEC”).  Guarantor has no material contingent obligations which are not otherwise disclosed in its most recent financial statements except as disclosed in any filings made by Guarantor or its affiliates with the SEC.

(l)

Accuracy of Information.  No information, statement or report furnished in writing to the Lender by Guarantor concerning the Guarantor in connection with this Guaranty or any other Loan Document or in connection with the consummation of the transactions contemplated hereby and thereby contains any material misstatement of fact or omits to state a material fact necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading as of the date made, except to the extent that such misstatements and omissions when considered in the totality of such information, statements and reports furnished by Guarantor are not materially misleading in the aggregate; provided, however, the foregoing representation and warranty shall not apply to any information, statement or report prepared by any third party.

(m)

No Conflicts of Interest.  To the best knowledge of Guarantor, no member, officer, agent or employee of the Lender has been or is in any manner interested, directly or indirectly, in that Person’s own name, or in the name of any other Person, in the Guarantor (other than through the ownership of publicly traded shares of common stock of affiliates of the Guarantor or limited partnership units of Guarantor), the Loan Documents, or any Mortgaged Property, in any contract for property or materials to be furnished or used in connection with such Mortgaged Property or in any aspect of the transactions contemplated by the Loan Documents.

(n)

Governmental Approvals.  To the best of Guarantor’s knowledge, no Governmental Approval not already obtained or made is required for the execution and delivery of this Guaranty or the performance of the terms and provisions hereof by Guarantor.

(o)

Governmental Orders.  Guarantor is not presently under any cease or desist order or other orders of a similar nature, temporary or permanent, of any Governmental Authority which would have the effect of preventing or hindering performance of its duties hereunder, nor

6

are there any proceedings presently in progress or to its knowledge contemplated which would, if successful, lead to the issuance of any such order.

(p)

No Reliance.  Guarantor acknowledges, represents and warrants that it understands the nature and structure of the transactions contemplated by this Guaranty and the other Loan Documents; that it is familiar with the provisions of all of the documents and instruments relating to such transactions; that it understands the risks inherent in such transactions, including the risk of loss of all or any of the Mortgaged Properties; and that it has not relied on the Lender or Fannie Mae for any guidance or expertise in analyzing the financial or other consequences of the transactions contemplated by this Guaranty or any other Loan Document or otherwise relied on the Lender or Fannie Mae in any manner in connection with interpreting, entering into or otherwise in connection with this Guaranty, any other Loan Document or any of the matters contemplated hereby or thereby.

(q)

Compliance with Applicable Law.  Guarantor is in compliance with Applicable Law, including all Governmental Approvals, if any, except for such items of noncompliance that, singly or in the aggregate, have not had and are not reasonably expected to cause, a Material Adverse Effect on Guarantor.

(r)

Contracts with Affiliates.  Except for the management agreement relating to each of the Mortgaged Properties or in the ordinary course of business and on terms which are no less favorable to the Guarantor than would be obtained in a corporate arms-length transaction with an unrelated third party, Guarantor has not entered into and is not a party to any material contract, lease or other agreement with any Affiliate of Guarantor for the provision of any service, materials or supplies relating to any Mortgaged Property.

Section 8.

Affirmative Covenants of Guarantor.  Guarantor agrees and covenants with the Lender that, at all times during the Term of this Guaranty:

(a)

Maintenance of Existence.  Guarantor shall maintain its existence and continue to be a limited partnership organized under the laws of the state of its organization. Guarantor shall continue to be duly qualified to do business in each jurisdiction in which such qualification is necessary to the conduct of its business and where the failure to be so qualified would adversely affect the validity of, the enforceability of, or the ability to perform, its obligations under this Guaranty.

(b)

Financial Statements; Accountants’ Reports: Other Information.  The Guarantor shall keep and maintain at all times complete and accurate books of accounts and records in sufficient detail to correctly reflect all of the Guarantor’s financial transactions and assets. In addition, the Guarantor shall furnish, or cause to be furnished, to the Lender the following:

(i)

So long as Guarantor is a reporting company under the Securities and Exchange Act of 1934 (the “’34 Act”), promptly upon their becoming available, copies of (A) all 10K’s, 10Q’s, 8K’s, annual reports and proxy statements, and all replacement, substitute or similar filings or reports required to be filed after the date of this Guaranty by the SEC or other Governmental Authority exercising similar functions, and (B) all press releases and other statements made available generally by Guarantor to the public concerning material developments in the business of Guarantor.

(ii)

In the event Guarantor is not a reporting company under the ’34 Act,

(A)

Annual Financial Statements.  As soon as available, and in any event within 90 days after the close of its fiscal year during the Term of this Agreement, the audited balance sheet of Guarantor as of the end of such fiscal year, the audited statement of income, equity and retained earnings of Guarantor

7

for such fiscal year and the audited statement of cash flows of Guarantor for such fiscal year, all in reasonable detail and stating in comparative form the respective figures for the corresponding date and period in the prior fiscal year, prepared in accordance with GAAP, consistently applied, and accompanied by a certificate of Guarantor’s independent certified public accountants to the effect that such financial statements have been prepared in accordance with GAAP, consistently applied, and that such financial statements fairly present the results of its operations and financial condition for the periods and dates indicated with such certification to be free of exceptions and qualifications as to the scope of the audit or as to the going concern nature of the business.

(B)

Quarterly Financial Statements.  As soon as available, and in any event within 45 days after each of the first three fiscal quarters of each fiscal year during the Term of this Agreement, the unaudited balance sheet of Guarantor as of the end of such fiscal quarter, the unaudited statement of income and retained earnings of Guarantor and the unaudited statement of cash flows of Guarantor for the portion of the fiscal year ended with the last day of such quarter, all in reasonable detail and stating in comparative form the respective figures for the corresponding date and period in the previous fiscal year, accompanied by a certificate of a member of Senior Management (which certificate shall be without personal liability to such officer) stating that such financial statements have been prepared in accordance with GAAP, consistently applied, and fairly present th e results of its operations and financial condition for the periods and dates indicated subject to year end adjustments in accordance with GAAP.

(iii)

[Left blank intentionally]

(iv)

Other Reports.  Promptly upon receipt thereof, all schedules, financial statements or other similar reports delivered by the Guarantor pursuant to the Loan Documents or reasonably requested by the Lender with respect to the Guarantor’s business affairs or condition (financial or otherwise) subject to the confidentiality covenant set forth below.  

After the providing by Guarantor of any statement, report or other information on a collective basis to Standard & Poor’s, Moody’s Investors Service, Duff & Phelps, Fitch and/or any other rating agency, and/or after providing any statement, report or other information on a collective basis to the banks or other institutions providing unsecured lines of credit and loans to Guarantor, Guarantor shall promptly furnish such statement, report or other information to Lender.

As used in this Paragraph (iv), the phrase “on a collective basis” means as provided to a group as a whole as opposed to an individual basis, e.g.., providing information to a rating agency or to a bank to respond to a particular request of such rating agency or bank.

The Lender agrees to treat all Information received by it (I) under this Paragraph (iv) as confidential and (II) which Guarantor requests in writing to the Persons at the Lender who receive any Information regarding Guarantor that such information be treated as confidential; provided, however, that such Information may be disclosed (A) as required by law, (B) to officers, directors, employees, agents, partners, attorneys, auditors, accountants, engineers and other consultants of the Lender, or its successors or assigns, who need to know such Information, provided such Persons are instructed to treat such Information confidentially, (C) by the Lender to any successor or assign of such Person, (D) to any federal or state regulatory authority having jurisdiction over the Lender, or its successors or assigns, (E) to any other Person to which such delivery or

8

disclosure may be necessary or appropriate (w) in compliance with any law, rule, regulation or order applicable to the Lender, or its successors or assigns, (x) in response to any subpoena or other legal process or information investigative demand, or (y) in connection with any litigation to which the Lender, or its successors or assigns, is a party.  Guarantor agrees that Information subject to this Paragraph (iv) does not include information which (I) was publicly known, or otherwise known to the Lender, or its successors or assigns, at the time of disclosure, (II) subsequently becomes publicly known through no act of or omission by the Lender or its successors or assigns, other than through disclosure by Guarantor or by any other Person in violation of this Paragraph (iv) or  any other confidentiality arrangement and the Lender, or its successors or assigns, has knowledge of suc h violation; provided, however, that in the event the disclosing Person shall reasonably endeavor to notify Guarantor thereof as soon as possible after such disclosure has been made and Guarantor shall be afford an opportunity to seek protective orders, or such other confidential treatment of such Information as Guarantor may deem reasonable.  

(v)

Certification.  All certifications required to be delivered pursuant to this Section 8(b) shall run directly to and be for the benefit of Lender and Fannie Mae.

(c)

Maintain Licenses.  Guarantor shall procure and maintain in full force and effect all licenses, Permits, charters and registrations which are material to the conduct of its business and shall abide by and satisfy all terms and conditions of all such licenses, Permits, charters and registrations.

(d)

Access to Records; Discussions With Senior Management.  To the extent permitted by law, Guarantor shall permit the Lender to:

(i)

inspect Guarantor’s books and records related to the Borrower and the Mortgaged Property;

(ii)

discuss Guarantor’s affairs, finances and accounts with Guarantor’s Senior Management or, provided that Senior Management of Guarantor has been given the opportunity by Lender to be a party to such discussions, property managers and independent public accountants;

(iii)

provided that Senior Management of Guarantor has been given the opportunity by Lender to be a party to such discussions, discuss the Mortgaged Properties’ conditions, operations or maintenance with the managers of such Mortgaged Properties and the officers and employees of Guarantor; and

(iv)

receive any other information that the Lender deems reasonably necessary or relevant in connection with the Guaranty, any Loan Document or the Guaranteed Obligations.

Notwithstanding the foregoing, prior to an Event of Default or Potential Event of Default, all inspections shall be conducted at reasonable times during normal business hours and upon reasonable notice to the Guarantor.

(e)

Inform the Lender of Material Events.  Guarantor shall promptly, but in any event within five (5) Business Days, inform the Lender in writing of any of the following (and shall deliver to the Lender copies of any related written communications, complaints, orders, judgments and other documents relating to the following) of which Guarantor has actual knowledge:

9

(i)

Defaults.  The occurrence of any Event of Default or any Potential Event of Default under any Loan Document;

(ii)

Bankruptcy Proceedings.  The commencement of any proceedings by or against Guarantor under any applicable bankruptcy, reorganization, liquidation, insolvency or other similar law now or hereafter in effect or of any proceeding in which a receiver, liquidator, trustee or other similar official is sought to be appointed for it;

(iii)

Accounting Changes.  Any material change in Guarantor’s accounting policies or financial reporting practices; and

(iv)

Restructuring of Guarantor.  Any restructuring or reorganization of any Guarantor.

(f)

ERISA.  Guarantor shall at all times remain in compliance in all material respects with all applicable provisions of ERISA and similar requirements of the PBGC.

(g)

Further Assurances.  Provided they do not materially increase the Guaranteed Obligations of Guarantor, Guarantor, at the request of the Lender, but without incurring any liability beyond the Guaranteed Obligations, shall execute and deliver and, if necessary, file or record such statements, documents, agreements, UCC financing and continuation statements and such other instruments and take such further action as the Lender from time to time may request as reasonably necessary, desirable or proper to carry out more effectively the purposes of this Guaranty or any of the other Loan Documents or to subject the Collateral to the lien and security interests of the Loan Documents or to evidence, perfect or otherwise implement, to assure the lien and security interests intended by the terms of the Loan Documents or in order to exercise or enforce its rights under the Loan Documents.

(h)

Monitoring Compliance.  Upon the request of the Lender, but without incurring any liability beyond the Guaranteed Obligations, from time to time, Guarantor shall promptly provide to the Lender such documents, certificates and other information as may be deemed reasonably necessary to enable the Lender to perform its functions under the Servicing Agreement as the same relates to the Guarantor.

Section 9.

Negative Covenants of Guarantor.

(a) Liquidation. Guarantor shall not dissolve or liquidate in whole or in part.

(b) Principal Place of Business. Guarantor shall not change its principal place of business or the location of its books and records without first giving 10 days' prior written notice to the Lender.

Section 10. Financial Covenants. Guarantor agrees and covenants with the Lender that, at all times during the Term of this Guaranty, the Net Worth of the REIT, the Guarantor and the Subsidiaries on a consolidated basis shall not be below $1,500,000,000.

Section 11.

Expenses.  Guarantor agrees to pay all reasonable costs and out-of-pocket expenses, including court costs and expenses and the reasonable fees and disbursements of legal counsel, incurred by or on behalf of Lender in connection with the enforcement of Guarantor’s obligations under this Guaranty or the protection of Lender’s rights under this Guaranty. The covenants contained in this Section shall survive the payment of the Guaranteed Obligations.

Section 12.

Condition of Borrower.  Guarantor is fully aware of the financial condition of Borrower and is executing and delivering this Guaranty based solely upon

10

Guarantor’s own independent investigation of all matters pertinent hereto and is not relying in any manner upon any representation or statement made by Lender. Guarantor represents and warrants that Guarantor is in a position to obtain, and Guarantor hereby assumes full responsibility for obtaining, any additional information concerning Borrower’s financial condition and any other matters pertinent hereto as Guarantor may desire and Guarantor is not relying upon or expecting Lender to furnish to Guarantor any information now or hereafter in Lender’s possession concerning the same or any other matter. By executing this Guaranty, Guarantor knowingly accepts the full range of risks encompassed within a contract of this type, which risks Guarantor acknowledges.

Section 13.

Further Assurances.  Guarantor agrees at any time and from time to time upon request by Lender to take, or cause to be taken, any action and to execute and deliver any additional documents which, in the reasonable opinion of Lender, may be necessary in order to assure to Lender the full benefits of this Guaranty, so long as any such action does not materially increase Guarantor’s Guaranteed Obligations hereunder or materially decrease its rights hereunder.

Section 14.

Subordination.  Guarantor hereby irrevocably and unconditionally agrees that any claims, direct or indirect, Guarantor may have by subrogation or other form of reimbursement, against Borrower or to any security or any interest therein, by virtue of this Guaranty or as a consequence of any payment made by Guarantor pursuant to this Guaranty, shall be fully subordinated in time and right of payment to the payment in full of the Guaranteed Obligations and all other obligations of Guarantor to Lender under this Guaranty.

Section 15.

No Subrogation.  Guarantor shall not have any right of subrogation against Borrower by reason of any payment by Guarantor under this Guaranty until such time as all of the Guaranteed Obligations have been satisfied in full. Nothing in the foregoing shall affect any claim which any Guarantor has against Borrower under the terms of the Organizational Documents of the Borrower.

Section 16.

Insolvency and Liability of Borrower.  So long as any of the Guaranteed Obligations is unpaid and this Guaranty is in effect, and to the extent not prohibited by the applicable bankruptcy court, Guarantor agrees to file all claims against Borrower in any bankruptcy or other proceeding in which the filing of claims is required by law in connection with indebtedness owed by Borrower to Guarantor and to assign to Lender all rights of Guarantor thereunder up to the lesser of (i) the amount of such indebtedness or (ii) the amount of the Guaranteed Obligations.  In all such cases the Person or Persons authorized to pay such claims shall pay to Lender the full amount thereof to the full extent necessary to pay the Guaranteed Obligations, and Guarantor hereby assigns to Lender all of Guarantor’s rights to all such payments to which Guarantor would otherwise be entitled. Notw ithstanding the foregoing, and except to the extent that any sums owed by Borrower to Lender under the Loan Documents shall have been fully satisfied thereby, the liability of Guarantor hereunder shall in no way be affected by

(a)

the release or discharge of Borrower in any creditors’, receivership, bankruptcy or other proceedings; or

(b)

the impairment, limitation or modification of the liability of Borrower or the estate of Borrower in bankruptcy resulting from the operation of any present or future provisions of the Bankruptcy Code or other statute or from the decision in any court.

Section 17.

Preferences, Fraudulent Conveyances, Etc.  If Lender is required to refund, or voluntarily refunds, any payment received from Borrower because such payment is or may be avoided, invalidated, declared fraudulent, set aside or determined to be void or voidable as a preference, fraudulent conveyance, impermissible setoff or a diversion of trust funds under

11

the bankruptcy laws or for any similar reason, including, without limitation, any judgment, order or decree of any court or administrative body having jurisdiction over Lender or any of its property, or any settlement or compromise of any claim effected by Lender with Borrower or other claimant (a “Rescinded Payment”), then Guarantor’s liability to Lender shall continue in full force and effect, or Guarantor’s liability to Lender shall be reinstated, as the case may be, with the same effect and to the same extent as if the Rescinded Payment had not been received by Lender (but only to the extent such Rescinded Payment was part of the Guaranteed Obligations hereunder), notwithstanding the cancellation or termination of any Note or any of the other Loan Documents. In addition, Guarantor shall pay, or reimburse Lender for, all expenses (including all reasona ble attorneys’ fees, court costs and related disbursements) incurred by Lender in the defense of any claim that a payment received by Lender in respect of all or any part of the Guaranteed Obligations from Guarantor must be refunded. The provisions of this Section shall survive the termination of this Guaranty and any satisfaction and discharge of Borrower by virtue of any payment, court order or any federal or state law.

Section 18.

Waiver.  Neither this Guaranty nor any term hereof may be changed, waived, discharged or terminated except by an instrument in writing signed by Lender and Guarantor expressly referring to this Guaranty and to the provisions so changed or limited. No such waiver shall extend to or affect any obligation not expressly waived or impair any right consequent thereon. No course of dealing or delay or omission on the part of Lender in exercising any right under this Guaranty shall operate as a waiver thereof or otherwise by prejudice thereto.

Section 19.

Notices.  All notices or other communications hereunder shall be sufficiently given and shall be deemed given when sent in the manner prescribed by the Loan Agreement addressed to the parties as follows:

As to the Guarantor:

AIMCO

Stanford Place 3

4582 South Ulster St. Parkway

Suite 1100

Denver, Colorado  80237

Attn:  Senior Vice President-Debt & Securities

with a copy to:

If to Lender or Fannie Mae:

As provided in the Loan Agreement.

Section 20.

Assignability by Lender.  Lender may, without notice to Guarantor, assign or transfer the Loans and the Loan Documents, in whole or in part. In such event, each and every immediate and successive assignee, transferee or holder of all or any part of the Loans and the Loan Documents shall have the right to enforce this Guaranty, by legal action or otherwise, as fully as if such assignee, transferee, or holder were by name specifically given such right and power in this Guaranty. Lender shall have an unimpaired right to enforce this Guaranty for its benefit as to so much of the Loans and the Loan Documents as Lender has not sold, assigned or transferred.

12

Section 21.

Guarantor Bound by Judgment Against Borrower.  Guarantor shall be conclusively bound, in any jurisdiction, by the judgment in any action by Lender against Borrower in connection with the Loan Documents (wherever instituted) as if Guarantor were a party to such action even if not so joined as a party.

Section 22.

Governing Law.  The provisions of Section 11.06 of the Loan Agreement (entitled Choice of Law; Consent to Jurisdiction; Waiver of Jury Trial) are hereby incorporated into this Agreement by this reference to the fullest extent as if the text of such Section were set forth in its entirety herein.

Section 23.

Invalid Provisions.  If any provision of this Guaranty or the application thereof to Guarantor or any circumstance in any jurisdiction whose laws govern this Guaranty shall, to any extent, be invalid or unenforceable under any applicable statute, regulation or rule of law, then such provision shall be deemed inoperative to the extent of such invalidity or unenforceability and shall be deemed modified to conform to such statute, regulation or rule or law. The remainder of this Guaranty and the application of any such invalid or unenforceable provision to parties, jurisdictions or circumstances other than those to whom or to which it is held invalid or unenforceable, shall not be affected by such invalidity or unenforceability nor shall such invalidity or unenforceability affect the validity or enforceability of any other provision of this Guaranty.

Section 24.

General Provisions.  This Guaranty shall be binding upon the respective successors and assigns of Guarantor, and shall inure to the benefit of Lender and its successors and assigns, including, without limitation, each successive holder of the Note. The descriptive headings of the Sections of the Guaranty have been inserted herein for convenience of reference only and shall not define or limit the provisions hereof.

ATTACHED EXHIBITS.  The following Exhibits are attached to this Instrument:

X Exhibit A Modifications to Guaranty

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]

13

IN WITNESS WHEREOF, Guarantor has signed this Guaranty under seal as of the day and year first above written.

AIMCO PROPERTIES, L.P., a Delaware limited partnership

By:

AIMCO-GP, Inc., a Delaware corporation, its general partner

By: /s/Patti K. Fielding

Patti K. Fielding

Executive Vice President and Treasurer

14

EXHIBIT A

MODIFICATIONS TO GUARANTY

The following modifications are hereby made to the text of the Guaranty that precedes this Exhibit:

1.

A new Section 25 is hereby added as follows:

“Section 25.

Additional Guaranty Relating to Bankruptcy.  

(a)

Notwithstanding any limitation on liability provided for elsewhere in this Guaranty, Guarantor hereby absolutely, unconditionally and irrevocably guarantees to Lender the full and prompt payment when due, whether at the maturity date or earlier, by reason of acceleration or otherwise, and at all times thereafter, the entire Indebtedness, in the event that:

(i)

Borrower voluntarily files for bankruptcy protection under the United States Bankruptcy Code; or

(ii)

Borrower voluntarily becomes subject to any reorganization, receivership, insolvency proceeding, or other similar proceeding pursuant to any other federal or state law affecting debtor and creditor rights; or

(iii)

an order of relief is entered against Borrower pursuant to the United States Bankruptcy Code or other federal or state law affecting debtor and creditor rights in any involuntary bankruptcy proceeding initiated or joined in by a "Related Party."  

(b)

For purposes of this Section, the term "Related Party" means:

(i)

Borrower or Guarantor; and

(ii)

any person or entity that holds, directly or indirectly, any ownership interest in or right to manage Borrower or Guarantor, including without limitation, any shareholder, member or partner of Borrower or Guarantor; and

(iii)

any person or entity in which any ownership interest (direct or indirect) or right to manage is held by Borrower, Guarantor or any partner, shareholder or member of, or any other person or entity holding an interest in, Borrower or Guarantor; and

(iv)

any other creditor of Borrower that is related by blood, marriage or adoption to Borrower, Guarantor or any partner, shareholder or member of, or any

PAGE A-1

other person or entity holding an interest in, Borrower or Guarantor.  

If Borrower, Guarantor or any Related Party has solicited creditors to initiate or participate in any proceeding referred to in this Section, regardless of whether any of the creditors solicited actually initiates or participates in the proceeding, then such proceeding shall be considered as having been initiated by a Related Party.”

_____________

INITIALS

PAGE A-2

EX-10

EXHIBIT 10.52

Prepared by, and after recording

return to:

Brian J. Iwashyna, Esquire

Troutman Sanders LLP

P.O. Box 1122

Richmond, Virginia  23218-1122

MULTIFAMILY MORTGAGE,

ASSIGNMENT OF RENTS

AND SECURITY AGREEMENT

(LOUISIANA)

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -

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TABLE OF CONTENTS

PAGE

1.

DEFINITIONS

2.

UNIFORM COMMERCIAL CODE SECURITY AGREEMENT

3.

ASSIGNMENT OF RENTS; APPOINTMENT OF RECEIVER; LENDER IN POSSESSION.

4.

ASSIGNMENT OF LEASES; LEASES AFFECTING THE MORTGAGED PROPERTY.

5.

PAYMENT OF INDEBTEDNESS; PERFORMANCE UNDER LOAN DOCUMENTS; PREPAYMENT PREMIUM  

6.

EXCULPATION

7.

DEPOSITS FOR TAXES, INSURANCE AND OTHER CHARGES.

8.

COLLATERAL AGREEMENTS

9.

APPLICATION OF PAYMENTS

10.

COMPLIANCE WITH LAWS

11.

USE OF PROPERTY

12.

PROTECTION OF LENDER'S SECURITY.

13.

INSPECTION.

14.

BOOKS AND RECORDS; FINANCIAL REPORTING.

15.

TAXES; OPERATING EXPENSES.

16.

LIENS; ENCUMBRANCES.

17.

PRESERVATION, MANAGEMENT AND MAINTENANCE OF MORTGAGED PROPERTY.

18.

ENVIRONMENTAL HAZARDS.

19.

PROPERTY AND LIABILITY INSURANCE.

20.

CONDEMNATION.

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21.

TRANSFERS OF THE MORTGAGED PROPERTY OR INTERESTS IN BORROWER.

22.

EVENTS OF DEFAULT

23.

REMEDIES CUMULATIVE

24.

FORBEARANCE.

25.

LOAN CHARGES

26.

WAIVER OF STATUTE OF LIMITATIONS

27.

WAIVER OF MARSHALLING.

28.

FURTHER ASSURANCES.

29.

ESTOPPEL CERTIFICATE

30.

GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE.

31.

NOTICE.

32.

SALE OF NOTE; CHANGE IN SERVICER

33.

SINGLE ASSET BORROWER

34.

SUCCESSORS AND ASSIGNS BOUND

35.

JOINT AND SEVERAL LIABILITY.

36.

RELATIONSHIP OF PARTIES; NO THIRD PARTY BENEFICIARY.

37.

SEVERABILITY; AMENDMENTS

38.

CONSTRUCTION

39.

LOAN SERVICING

40.

DISCLOSURE OF INFORMATION

41.

NO CHANGE IN FACTS OR CIRCUMSTANCES

42.

SUBROGATION.

43.

ACCELERATION; FORECLOSURE; CONFESSION OF JUDGMENT

44.

RELEASE..

45.

WAIVER OF HOMESTEAD

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46.

VENDOR'S LIEN MORTGAGE

47.

ATTORNEYS' FEES

48.

MORTGAGE AND CONVEYANCE CERTIFICATES

49.

LATE CHARGE.

50.

KEEPER OF MORTGAGED PROPERTY

51.

WAIVER OF TRIAL BY JURY.

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Shadow Wood Apartments

MULTIFAMILY MORTGAGE,

ASSIGNMENT OF RENTS

AND SECURITY AGREEMENT

BE IT KNOWN on this 18^th day of January, 2007, before me the undersigned Notary Public, and in the presence of the undersigned competent witnesses, personally came and appeared VMS NATIONAL PROPERTIES, a joint venture general partnership organized and existing under the laws of Illinois (Taxpayer Identification No. 36-3311347) ("Borrower"), whose permanent mailing address is c/o AIMCO, Stanford Place 3, 4582 South Ulster Street Parkway, Suite 1100, Denver, Colorado 80237, who by me duly sworn did declare and acknowledge that Borrower is indebted in favor of CAPMARK FINANCE INC., a corporation organized and existing under the laws of California, and whose permanent mailing address is 116 Welsh Road, Horsham, Pennsylvania 19044, Attn: Servicing-Executive Vice President (together with its successors and assigns and any subsequent holders, "Lender "), under Borrower's Multifamily Note, dated as of the date of this Instrument, in the principal amount of $3,900,682.00, which Note is payable to the order of the above-named Lender, has a stated maturity date as set forth in the Loan Agreement, and, together with and as a part of the Indebtedness, is secured by this Multifamily Mortgage, Assignment of Rents and Security Agreement (the “Instrument”).

TO SECURE TO LENDER the repayment of the Indebtedness (including the payment of attorneys fees), and all renewals, extensions, modifications and refinancings of the Indebtedness, and the performance of the covenants and agreements of Borrower contained in the Loan Documents, Borrower hereby mortgages, hypothecates and assigns to Lender the Mortgaged Property, including the Land located in the Parish of Ouachita, State of Louisiana and described in Exhibit A attached to this Instrument.  The maximum amount of the Indebtedness outstanding at any time and from time to time that is secured by this Instrument shall be limited to an amount equal to the original principal balance of the Note multiplied by three, inclusive of principal, interest, late charges, default interest, prepayment premiums, additional advances pursuant to this Instrument, costs, expenses and attorneys’ fees.

Borrower represents and warrants that Borrower is the full owner and lawfully seized of the Mortgaged Property and has the right, power and authority to mortgage, grant, convey and assign the Mortgaged Property, and that the Mortgaged Property is unencumbered.  Borrower covenants that Borrower will warrant and defend generally the title to, and the ownership and possession of, the Mortgaged Property against all claims and demands, subject to any servitudes, easements and restrictions listed in a schedule of exceptions to coverage in any title insurance policy issued to Lender contemporaneously with the execution and recordation of this Instrument and insuring Lender's interest in the Mortgaged Property.

Covenants.  Borrower and Lender covenant and agree as follows:

1.

DEFINITIONS. The following terms, when used in this Instrument (including when used in the above recitals), shall have the following meanings:

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(a)

"Borrower" means all persons or entities identified as "Borrower" in the first paragraph of this Instrument, together with their successors and assigns.

(b)

"Collateral Agreement" means any separate agreement between Borrower and Lender for the purpose of establishing replacement reserves for the Mortgaged Property, establishing a fund to assure completion of repairs or improvements specified in that agreement, or assuring reduction of the outstanding principal balance of the Indebtedness if the occupancy of or income from the Mortgaged Property does not increase to a level specified in that agreement, or any other agreement or agreements between Borrower and Lender which provide for the establishment of any other fund, reserve or account.

(c)

"Environmental Permit" means any permit, license, or other authorization issued under any Hazardous Materials Law with respect to any activities or businesses conducted on or in relation to the Mortgaged Property.

(d)

"Event of Default" means the occurrence of any event listed in Section 22.

(e)

"Fixtures" means all property which is so attached to the Land or the Improvements as to constitute an integral or component part, or a fixture under applicable law, including: machinery, equipment, engines, boilers, incinerators, installed building materials; systems and equipment for the purpose of supplying or distributing heating, cooling, electricity, gas, water, air, or light; antennas, cable, wiring and conduits used in connection with radio, television, security, fire prevention, or fire detection or otherwise used to carry electronic signals; telephone systems and equipment; elevators and related machinery and equipment; fire detection, prevention and extinguishing systems and apparatus; security and access control systems and apparatus; plumbing systems; water heaters, ranges, stoves, microwave ovens, refrigerators, dishwashers, garbage disposers, washers, dryers and ot her appliances; light fixtures, awnings, storm windows and storm doors; pictures, screens, blinds, shades, curtains and curtain rods; mirrors; cabinets, paneling, rugs and floor and wall coverings; fences, trees and plants; swimming pools; and exercise equipment.

(f)

"Governmental Authority" means any board, commission, department or body of any municipal, county, state or federal governmental unit, or any subdivision of any of them, that has or acquires jurisdiction over the Mortgaged Property or the use, operation or improvement of the Mortgaged Property.

(g)

"Hazardous Materials" means petroleum and petroleum products and compounds containing them, including gasoline, diesel fuel and oil; explosives; flammable materials; radioactive materials; polychlorinated biphenyls ("PCBs") and compounds containing them; lead and lead-based paint; asbestos or asbestos-containing materials in any form that is or could become friable; underground or above-ground storage tanks, whether empty or containing any substance; any substance the presence of which on the Mortgaged Property is prohibited by any federal, state or local authority; any substance that requires special handling; and any other material or substance now or in the future defined as a "hazardous substance," "hazardous material," "hazardous waste," "toxic substance," "toxic pollutant," "contaminant," or " pollutant" within the meaning of any Hazardous Materials Law.

(h)

"Hazardous Materials Laws" means all federal, state, and local laws, ordinances and regulations and standards, rules, policies and other governmental requirements, administrative rulings and court judgments and decrees in effect now or in the future and including all amendments, that relate to Hazardous Materials and apply to Borrower or to the

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Mortgaged Property. Hazardous Materials Laws include, but are not limited to, the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., the Toxic Substance Control Act, 15 U.S.C. Section 2601, et seq., the Clean Water Act, 33 U.S.C. Section 1251, et seq., and the Hazardous Materials Transportation Act, 49 U.S.C. Section 5101, et seq., and their state analogs.

(i)

"Impositions" and "Imposition Deposits" are defined in Section 7(a).

(j)

"Improvements" means the buildings, structures, improvements, and alterations now constructed or at any time in the future constructed or placed upon the Land, including any future replacements and additions.

(k)

"Indebtedness" means the principal of, interest on, and all other amounts due at any time under, the Note, this Instrument or any other Loan Document, including prepayment premiums, late charges, default interest, attorneys’ fees, keeper fees, collection and foreclosure expenses, advances as provided in Section 12 to protect the security of this Instrument, and any other sums that Lender may advance or incur with respect to the Mortgaged Property, or as otherwise provided in this Instrument or any other Loan Document.

(l)

[Intentionally omitted]

(m)

"Key Principal" means the natural person(s) or entity identified as such at the foot of this Instrument, and any person or entity who becomes a Key Principal after the date of this Instrument and is identified as such in an amendment or supplement to this Instrument.

(n)

"Land" means the immovable property described in Exhibit A.  The immovable property is located at _________________.

(o)

"Leases" means all present and future leases, subleases, licenses, concessions or grants or other possessory interests now or hereafter in force, whether oral or written, covering or affecting the Mortgaged Property, or any portion of the Mortgaged Property (including proprietary leases or occupancy agreements if Borrower is a cooperative housing corporation), and all modifications, extensions or renewals.

(p)

"Lender" means the entity identified as "Lender" in the first paragraph of this Instrument and its successors and assigns, or any subsequent holder of the Note.

(q)

"Loan Documents" means the Note, this Instrument, all guaranties, all indemnity agreements, all Collateral Agreements, O&M Programs, and any other documents now or in the future executed by Borrower, Key Principal, any guarantor or any other person in connection with the loan evidenced by the Note, as such documents may be amended from time to time.

(r)

"Loan Servicer" means the entity that from time to time is designated by Lender to collect payments and deposits and receive notices under the Note, this Instrument and any other Loan Document, and otherwise to service the loan evidenced by the Note for the benefit of Lender.  Unless Borrower receives notice to the contrary, the Loan Servicer is the entity identified as "Lender" in the first paragraph of this Instrument.

(s)

"Mortgaged Property" means all of Borrower's present and future right, title and interest in and to all of the following:

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(1)

the Land;

(2)

the Improvements;

(3)

the Fixtures;

(4)

the Personalty;

(5)

all current and future rights, including air rights, development rights, zoning rights and other similar rights or interests, servitudes, easements, tenements, rights-of-way, strips and gores of land, streets, alleys, roads, sewer rights, waters, watercourses, and appurtenances related to or benefiting the Land or the Improvements, or both, and all rights-of-way, streets, alleys and roads which may have been or may in the future be vacated;

(6)

all proceeds paid or to be paid by any insurer of the Land, the Improvements, the Fixtures, the Personalty or any other part of the Mortgaged Property, whether or not Borrower obtained the insurance pursuant to Lender’s requirement;

(7)

all awards, payments and other compensation made or to be made by any municipal, state or federal authority with respect to the Land, the Improvements, the Fixtures, the Personalty or any other part of the Mortgaged Property, including any awards or settlements resulting from condemnation proceedings or the total or partial taking of the Land, the Improvements, the Fixtures, the Personalty or any other part of the Mortgaged Property under the power of eminent domain or otherwise and including any conveyance in lieu thereof;

(8)

all contracts, options and other agreements for the sale of the Land, the Improvements, the Fixtures, the Personalty or any other part of the Mortgaged Property entered into by Borrower now or in the future, including cash or securities deposited to secure performance by parties of their obligations;

(9)

all proceeds from the conversion, voluntary or involuntary, of any of the above into cash or liquidated claims, and the right to collect such proceeds;

(10)

all Rents and Leases;

(11)

all earnings, royalties, accounts receivable, issues and profits from the Land, the Improvements or any other part of the Mortgaged Property, and all undisbursed proceeds of the loan secured by this Instrument and, if Borrower is a cooperative housing corporation, maintenance charges or assessments payable by shareholders or residents;

(12)

all Imposition Deposits;

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(13)

all refunds or rebates of Impositions by any municipal, state or federal authority or insurance company (other than refunds applicable to periods before the real property tax year in which this Instrument is dated);

(14)

all tenant security deposits which have not been forfeited by any tenant under any Lease; and

(15)

all names under or by which any of the above Mortgaged Property may be operated or known, and all trademarks, trade names, and goodwill relating to any of the Mortgaged Property.

(t)

"Note" means the Multifamily Note described on page 1 of this Instrument, including the Acknowledgment and Agreement of Key Principal to Personal Liability for Exceptions to Non-Recourse Liability (if any), and all schedules, riders, allonges and addenda, as such Multifamily Note may be amended from time to time.

(u)

"O&M Program" is defined in Section 18(a).

(v)

"Personalty" means all equipment, inventory, general intangibles which are used now or in the future in connection with the ownership, management or operation of the Land or the Improvements or are located on the Land or in the Improvements, including furniture, furnishings, machinery, building materials, appliances, goods, supplies, tools, books, records (whether in written or electronic form), computer equipment (hardware and software) and other tangible (corporeal) personal (movable) property (other than Fixtures) which are used now or in the future in connection with the ownership, management or operation of the Land or the Improvements or are located on the Land or in the Improvements, and any operating agreements relating to the Land or the Improvements, and any surveys, plans and specifications and contracts for architectural, engineering and construction services relating to the Land or the Improvements and all other intangible (incorporeal) property and rights relating to the operation of, or used in connection with, the Land or the Improvements, including all governmental permits relating to any activities on the Land.

(w)

"Property Jurisdiction" is defined in Section 30(a).

(x)

"Rents" means all rents (whether from residential or non-residential space), revenues and other income of the Land or the Improvements, including subsidy payments received from any sources (including, but not limited to payments under any Housing Assistance Payments Contract) parking fees, laundry and vending machine income and fees and charges for food, health care and other services provided at the Mortgaged Property, whether now due, past due, or to become due, and deposits forfeited by tenants.

(y)

"Taxes" means all taxes, assessments, vault rentals and other charges, if any, general, special or otherwise, including all assessments for schools, public betterments and general or local improvements, which are levied, assessed or imposed by any public authority or quasi-public authority, and which, if not paid, will become a lien, on the Land or the Improvements.

(z)

"Transfer" means (A) a sale, assignment, transfer or other disposition (whether voluntary, involuntary or by operation of law, and whether on a bond for deed basis or otherwise); (B) the granting, creating or attachment of a lien, encumbrance or security interest (whether voluntary, involuntary or by operation of law, and whether on a bond for deed basis or

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otherwise); (C) the issuance or other creation of an ownership interest in a legal entity, including a partnership interest, interest in a limited liability company or corporate stock; (D) the withdrawal, retirement, removal or involuntary resignation of a partner in a partnership or a member or manager in a limited liability company; or (E) the merger, dissolution, liquidation, or consolidation of a legal entity.  "Transfer" does not include (i) a conveyance of the Mortgaged Property at a judicial or non-judicial foreclosure sale under this Instrument or (ii) the Mortgaged Property becoming part of a bankruptcy estate by operation of law under the United States Bankruptcy Code.  For purposes of defining the term "Transfer," the term "partnership" shall mean a general partnership, a limited partnership or partnership in commendam, a joint venture and a registered limited liability partnership, and the term "partner" shall mean a general partner, a limited partner and a joint venturer.

(aa)

“Uniform Commercial Code” or “UCC” means the Uniform Commercial Code as adopted in any state or the District of Columbia.  In Louisiana, “Uniform Commercial Code” or “UCC” shall refer to the Louisiana Commercial Laws, Louisiana Revised Statues Title 10, Sections 1-101, et seq.

2.

UNIFORM COMMERCIAL CODE SECURITY AGREEMENT. This Instrument is also a security agreement under the Uniform Commercial Code for any of the Mortgaged Property which, under applicable law, may be subject to a security interest under the Uniform Commercial Code, whether acquired now or in the future, and all products and cash and non-cash proceeds thereof (collectively, "UCC Collateral"), and Borrower hereby grants to Lender a security interest in the UCC Collateral.  Borrower hereby authorizes Lender to file financing statements, continuation statements and financing statement amendments, in such form as Lender may require to perfect or continue the perfection of this security interest and Borrower agrees, if Lender so requests, to execute and deliver to Lender such financing statements, continuation statements and amendments.  Borrower s hall pay all filing costs and all costs and expenses of any record searches for financing statements that Lender may require.  Without the prior written consent of Lender, Borrower shall not create or permit to exist any other lien or security interest in any of the UCC Collateral.  If an Event of Default has occurred and is continuing, Lender shall have the remedies of a secured party under the Uniform Commercial Code, in addition to all remedies provided by this Instrument or existing under applicable law.  In exercising any remedies, Lender may exercise its remedies against the UCC Collateral separately or together, and in any order, without in any way affecting the availability of Lender's other remedies.  This Instrument constitutes a financing statement with respect to any part of the Mortgaged Property which is or may become a Fixture.

3.

ASSIGNMENT OF RENTS; APPOINTMENT OF RECEIVER; LENDER IN POSSESSION.

(a)

As part of the consideration for the Indebtedness, Borrower absolutely and unconditionally assigns and transfers to Lender all Rents. It is the intention of Borrower to establish a present, absolute and irrevocable transfer and assignment to Lender of all Rents and to authorize and empower Lender to collect and receive all Rents without the necessity of further action on the part of Borrower.  Promptly upon request by Lender, Borrower agrees to execute and deliver such further assignments as Lender may from time to time require.  Borrower and Lender intend this assignment of Rents to be immediately effective and to constitute an absolute present assignment and not an assignment for additional security only.  For purposes of giving effect to this absolute assignment of Rents, and for no other purpose, Rents shall not be deemed to be a part of the "Mortgaged Property," as t hat term is defined in Section 1(s).  However, if this present, absolute and unconditional assignment of Rents is not enforceable by its terms under the

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laws of the Property Jurisdiction, then the Rents shall be included as a part of the Mortgaged Property and it is the intention of the Borrower that in this circumstance this Instrument create and perfect a security interest on Rents in favor of Lender, which security interest shall be effective as of the date of this Instrument.

(b)

After the occurrence of an Event of Default, Borrower authorizes Lender to collect, sue for and compromise Rents and directs each tenant of the Mortgaged Property to pay all Rents to, or as directed by, Lender, and Borrower shall, upon Borrower’s receipt of any Rents from any sources (including, but not limited to subsidy payments under any Housing Assistance Payments Contract), pay the total amount of such receipts to the Lender.  However, until the occurrence of an Event of Default, Lender hereby grants to Borrower a revocable license to collect and receive all Rents, to hold all Rents in trust for the benefit of Lender and to apply all Rents to pay the installments of interest and principal then due and payable under the Note and the other amounts then due and payable under the other Loan Documents, including Imposition Deposits, and to pay the current costs and expenses of managing, operating and maintaining the Mortgaged Property, including utilities, Taxes and insurance premiums (to the extent not included in Imposition Deposits), tenant improvements and other capital expenditures.  So long as no Event of Default has occurred and is continuing, the Rents remaining after application pursuant to the preceding sentence may be retained by Borrower free and clear of, and released from, Lender's rights with respect to Rents under this Instrument.  From and after the occurrence of an Event of Default, and without the necessity of Lender entering upon and taking and maintaining control of the Mortgaged Property directly, or by a receiver, Borrower’s license to collect Rents shall automatically terminate and Lender shall without notice be entitled to all Rents as they become due and payable, including Rents then due and unpaid.  Borrower shall pay to Lender upon demand all Rents to which Lender is entitled.  At any time on or after the date of Lender’s demand for Rents, Lender may give, and Borrower hereby irrevocably authorizes Lender to give, notice to all tenants of the Mortgaged Property instructing them to pay all Rents to Lender, no tenant shall be obligated to inquire further as to the occurrence or continuance of an Event of Default, and no tenant shall be obligated to pay to Borrower any amounts which are actually paid to Lender in response to such a notice.  Any such notice by Lender shall be delivered to each tenant personally, by mail or by delivering such demand to each rental unit.  Borrower shall not interfere with and shall cooperate with Lender's collection of such Rents.

(c)

Borrower represents and warrants to Lender that Borrower has not executed any prior assignment of Rents (other than an assignment of Rents securing indebtedness that will be paid off and discharged with the proceeds of the loan evidenced by the Note), that Borrower has not performed, and Borrower covenants and agrees that it will not perform, any acts and has not executed, and shall not execute, any instrument which would prevent Lender from exercising its rights under this Section 3, and that at the time of execution of this Instrument there has been no anticipation or prepayment of any Rents for more than two months prior to the due dates of such Rents.  Borrower shall not collect or accept payment of any Rents more than two months prior to the due dates of such Rents.

(d)

If an Event of Default has occurred and is continuing, Lender may, regardless of the adequacy of Lender's security or the solvency of Borrower and even in the absence of waste, enter upon and take and maintain full control of the Mortgaged Property in order to perform all acts that Lender in its discretion determines to be necessary or desirable for the operation and maintenance of the Mortgaged Property, including the execution, cancellation or modification of Leases, the collection of all Rents, the making of repairs to the Mortgaged Property and the execution or termination of contracts providing for the management, operation or maintenance of the Mortgaged Property, for the purposes of enforcing the assignment of Rents pursuant to

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Section 3(a), protecting the Mortgaged Property or the security of this Instrument, or for such other purposes as Lender in its discretion may deem necessary or desirable.  Alternatively, if an Event of Default has occurred and is continuing, regardless of the adequacy of Lender's security, without regard to Borrower’s solvency and without the necessity of giving prior notice (oral or written) to Borrower, Lender may apply to any court having jurisdiction for the appointment of a receiver for the Mortgaged Property to take any or all of the actions set forth in the preceding sentence.  If Lender elects to seek the appointment of a receiver for the Mortgaged Property at any time after an Event of Default has occurred and is continuing, Borrower, by its execution of this Instrument, expressly consents to the appointment of such receiver, including the appointment of a receiver ex parte if permitted by applicable law.  Lender or the receiver, as the case may be, shall be entitled to receive a reasonable fee for managing the Mortgaged Property.  Immediately upon appointment of a receiver or immediately upon the Lender's entering upon and taking possession and control of the Mortgaged Property, Borrower shall surrender possession of the Mortgaged Property to Lender or the receiver, as the case may be, and shall deliver to Lender or the receiver, as the case may be, all documents, records (including records on electronic or magnetic media), accounts, surveys, plans, and specifications relating to the Mortgaged Property and all security deposits and prepaid Rents.  In the event Lender takes possession and control of the Mortgaged Property, Lender may exclude Borrower and its representatives from the Mortgaged Property.  Borrower acknowledges and agrees that the exercise by Lender of any of the rights conferred under this Section 3 shall not be construed to make Lender a mortgagee-in-possession of the Mortgaged Property so long as Lender has not itself entered into actual possession of the Land and Improvements.

(e)

If Lender enters the Mortgaged Property, Lender shall be liable to account only to Borrower and only for those Rents actually received.  Lender shall not be liable to Borrower, anyone claiming under or through Borrower or anyone having an interest in the Mortgaged Property, by reason of any act or omission of Lender under this Section 3, and Borrower hereby releases and discharges Lender from any such liability to the fullest extent permitted by law.

(f)

If the Rents are not sufficient to meet the costs of taking control of and managing the Mortgaged Property and collecting the Rents, any funds expended by Lender for such purposes shall become an additional part of the Indebtedness as provided in Section 12.

(g)

Any entering upon and taking of control of the Mortgaged Property by Lender or the receiver, as the case may be, and any application of Rents as provided in this Instrument shall not cure or waive any Event of Default or invalidate any other right or remedy of Lender under applicable law or provided for in this Instrument.

4.

ASSIGNMENT OF LEASES; LEASES AFFECTING THE MORTGAGED PROPERTY.

(a)

As part of the consideration for the Indebtedness, Borrower absolutely and unconditionally assigns and transfers to Lender all of Borrower's right, title and interest in, to and under the Leases, including Borrower's right, power and authority to modify the terms of any such Lease, or extend or terminate any such Lease.  It is the intention of Borrower to establish a present, absolute and irrevocable transfer and assignment to Lender of all of Borrower’s right, title and interest in, to and under the Leases.  Borrower and Lender intend this assignment of the Leases to be immediately effective and to constitute an absolute present assignment and not an assignment for additional security only.  For purposes of giving effect to this absolute assignment of the Leases, and for no other purpose, the Leases shall not be deemed to be a part of the “Mortgaged Property,” as th at term is defined in Section 1(s).  However, if this present,

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absolute and unconditional assignment of the Leases is not enforceable by its terms under the laws of the Property Jurisdiction, then the Leases shall be included as a part of the Mortgaged Property and it is the intention of the Borrower that in this circumstance this Instrument create and perfect a security interest on the Leases in favor of Lender, which security interest shall be effective as of the date of this Instrument.

(b)

Until Lender gives notice to Borrower of Lender's exercise of its rights under this Section 4, Borrower shall have all rights, power and authority granted to Borrower under any Lease (except as otherwise limited by this Section or any other provision of this Instrument), including the right, power and authority to modify the terms of any Lease or extend or terminate any Lease.  Upon the occurrence of an Event of Default, the permission given to Borrower pursuant to the preceding sentence to exercise all rights, power and authority under Leases shall automatically terminate.  Borrower shall comply with and observe Borrower's obligations under all Leases, including Borrower's obligations pertaining to the maintenance and disposition of tenant security deposits.

(c)

Borrower acknowledges and agrees that the exercise by Lender, either directly or by a receiver, of any of the rights conferred under this Section 4 shall not be construed to make Lender a mortgagee-in-possession of the Mortgaged Property so long as Lender has not itself entered into actual possession of the Land and the Improvements.  The acceptance by Lender of the assignment of the Leases pursuant to Section 4(a) shall not at any time or in any event obligate Lender to take any action under this Instrument or to expend any money or to incur any expenses.  Lender shall not be liable in any way for any injury or damage to person or property sustained by any person or persons, firm or corporation in or about the Mortgaged Property.  Prior to Lender's actual entry into and taking possession of the Mortgaged Property, Lender shall not (i) be obligated to perform any of the t erms, covenants and conditions contained in any Lease (or otherwise have any obligation with respect to any Lease); (ii) be obligated to appear in or defend any action or proceeding relating to the Lease or the Mortgaged Property; or (iii) be responsible for the operation, control, care, management or repair of the Mortgaged Property or any portion of the Mortgaged Property.  The execution of this Instrument by Borrower shall constitute conclusive evidence that all responsibility for the operation, control, care, management and repair of the Mortgaged Property is and shall be that of Borrower, prior to such actual entry and taking of possession.

(d)

Upon delivery of notice by Lender to Borrower of Lender's exercise of Lender's rights under this Section 4 at any time after the occurrence of an Event of Default, and without the necessity of Lender entering upon and taking and maintaining control of the Mortgaged Property directly, by a receiver, or by any other manner or proceeding permitted by the laws of the Property Jurisdiction, Lender immediately shall have all rights, powers and authority granted to Borrower under any Lease, including the right, power and authority to modify the terms of any such Lease, or extend or terminate any such Lease.

(e)

Borrower shall, promptly upon Lender's request, deliver to Lender an executed copy of each residential Lease then in effect. All Leases for residential dwelling units shall be on forms approved by Lender, shall be for initial terms of at least six months and not more than two years, and shall not include options to purchase.  If customary in the applicable market, residential Leases with terms of less than six months may be permitted with Lender's prior written consent.

(f)

Borrower shall not lease any portion of the Mortgaged Property for non-residential use except with the prior written consent of Lender and Lender's prior written approval of the Lease agreement.  Borrower shall not modify the terms of, or extend or

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terminate, any Lease for non-residential use (including any Lease in existence on the date of this Instrument) without the prior written consent of Lender.  Borrower shall, without request by Lender, deliver an executed copy of each non-residential Lease to Lender promptly after such Lease is signed.   All non-residential Leases, including renewals or extensions of existing Leases, shall specifically provide that (1) such Leases are subordinate to the lien of this Instrument (unless waived in writing by Lender); (2) the tenant shall attorn to Lender and any purchaser at a foreclosure sale, such attornment to be self-executing and effective upon acquisition of title to the Mortgaged Property by any purchaser at a foreclosure sale or by Lender in any manner; (3) the tenant agrees to execute such further evidences of attornment as Lender or any pur chaser at a foreclosure sale may from time to time request; (4) the Lease shall not be terminated by foreclosure or any other transfer of the Mortgaged Property; (5) after a foreclosure sale of the Mortgaged Property, Lender or any other purchaser at such foreclosure sale may, at Lender's or such purchaser's option, accept or terminate such Lease; and (6) the tenant shall, upon receipt after the occurrence of an Event of Default of a written request from Lender, pay all Rents payable under the Lease to Lender.

(g)

Borrower shall not receive or accept Rent under any Lease (whether residential or non-residential) for more than two months in advance.

5.

PAYMENT OF INDEBTEDNESS; PERFORMANCE UNDER LOAN DOCUMENTS; PREPAYMENT PREMIUM.  Borrower shall pay the Indebtedness when due in accordance with the terms of the Note and the other Loan Documents and shall perform, observe and comply with all other provisions of the Note and the other Loan Documents.  Borrower shall pay a prepayment premium in connection with certain prepayments of the Indebtedness, including a payment made after Lender's exercise of any right of acceleration of the Indebtedness, as provided in the Note.

6.

EXCULPATION.  Borrower’s personal liability for payment of the Indebtedness and for performance of the other obligations to be performed by it under this Instrument is limited in the manner, and to the extent, provided in the Note.

7.

DEPOSITS FOR TAXES, INSURANCE AND OTHER CHARGES.

(a)

Borrower shall deposit with Lender on the day monthly installments of principal or interest, or both, are due under the Note (or on another day designated in writing by Lender), until the Indebtedness is paid in full, an additional amount sufficient to accumulate with Lender the entire sum required to pay, when due (1) any water and sewer charges which, if not paid, may result in a lien on all or any part of the Mortgaged Property, (2) the premiums for fire and other hazard insurance, rent loss insurance and such other insurance as Lender may require under Section 19, (3) Taxes, and (4) amounts for other charges and expenses which Lender at any time reasonably deems necessary to protect the Mortgaged Property, to prevent the imposition of liens on the Mortgaged Property, or otherwise to protect Lender's interests, all as reasonably estimated from time to time by Lender.  The amounts dep osited under the preceding sentence are collectively referred to in this Instrument as the "Imposition Deposits".  The obligations of Borrower for which the Imposition Deposits are required are collectively referred to in this Instrument as "Impositions".  The amount of the Imposition Deposits shall be sufficient to enable Lender to pay each Imposition before the last date upon which such payment may be made without any penalty or interest charge being added.  Lender shall maintain records indicating how much of the monthly Imposition Deposits and how much of the aggregate Imposition Deposits held by Lender are held for the purpose of paying Taxes, insurance premiums and each other obligation of Borrower for which Imposition Deposits are required.  

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Any waiver by Lender of the requirement that Borrower remit Imposition Deposits to Lender may be revoked by Lender, in Lender's discretion, at any time upon notice to Borrower.

(b)

Imposition Deposits shall be held in an institution (which may be Lender, if Lender is such an institution) whose deposits or accounts are insured or guaranteed by a federal agency.  Lender shall not be obligated to open additional accounts or deposit Imposition Deposits in additional institutions when the amount of the Imposition Deposits exceeds the maximum amount of the federal deposit insurance or guaranty.  Lender shall apply the Imposition Deposits to pay Impositions so long as no Event of Default has occurred and is continuing.  Unless applicable law requires, Lender shall not be required to pay Borrower any interest, earnings or profits on the Imposition Deposits.  Borrower hereby pledges and grants to Lender a security interest in the Imposition Deposits as additional security for all of Borrower's obligations under this Instrument and the other Loan Documents.   Any amounts deposited with Lender under this Section 7 shall not be trust funds, nor shall they operate to reduce the Indebtedness, unless applied by Lender for that purpose under Section 7(e).

(c)

If Lender receives a bill or invoice for an Imposition, Lender shall pay the Imposition from the Imposition Deposits held by Lender.  Lender shall have no obligation to pay any Imposition to the extent it exceeds Imposition Deposits then held by Lender.  Lender may pay an Imposition according to any bill, statement or estimate from the appropriate public office or insurance company without inquiring into the accuracy of the bill, statement or estimate or into the validity of the Imposition.

(d)

If at any time the amount of the Imposition Deposits held by Lender for payment of a specific Imposition exceeds the amount reasonably deemed necessary by Lender, the excess shall be credited against future installments of Imposition Deposits.  If at any time the amount of the Imposition Deposits held by Lender for payment of a specific Imposition is less than the amount reasonably estimated by Lender to be necessary, Borrower shall pay to Lender the amount of the deficiency within 15 days after notice from Lender.

(e)

If an Event of Default has occurred and is continuing, Lender may apply any Imposition Deposits, in any amounts and in any order as Lender determines, in Lender's discretion, to pay any Impositions or as a credit against the Indebtedness. Upon payment in full of the Indebtedness, Lender shall refund to Borrower any Imposition Deposits held by Lender.

8.

COLLATERAL AGREEMENTS.  Borrower shall deposit with Lender such amounts as may be required by any Collateral Agreement and shall perform all other obligations of Borrower under each Collateral Agreement.

9.

APPLICATION OF PAYMENTS.  If at any time Lender receives, from Borrower or otherwise, any amount applicable to the Indebtedness which is less than all amounts due and payable at such time, then Lender may apply that payment to amounts then due and payable in any manner and in any order determined by Lender, in Lender's discretion.  Neither Lender's acceptance of an amount which is less than all amounts then due and payable nor Lender's application of such payment in the manner authorized shall constitute or be deemed to constitute either a waiver of the unpaid amounts or an accord and satisfaction.  Notwithstanding the application of any such amount to the Indebtedness,  Borrower’s obligations under this Instrument and the Note shall remain unchanged.

10.

COMPLIANCE WITH LAWS.  Borrower shall comply with all laws, ordinances, regulations and requirements of any Governmental Authority and all recorded lawful

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covenants and agreements relating to or affecting the Mortgaged Property, including all laws, ordinances, regulations, requirements and covenants pertaining to health and safety, construction of improvements on the Mortgaged Property, fair housing, zoning and land use, and Leases.  Borrower also shall comply with all applicable laws that pertain to the maintenance and disposition of tenant security deposits.  Borrower shall at all times maintain records sufficient to demonstrate  compliance with the provisions of this Section 10.  Borrower shall take appropriate measures to prevent, and shall not engage in or knowingly permit, any illegal activities at the Mortgaged Property that could endanger tenants or visitors, result in damage to the Mortgaged Property, result in forfeiture of the Mortgaged Property, or otherwise materially impair the lien created by this Instrument or Lender's interest in the Mortgaged Property.  Borrower represents and warrants to Lender that no portion of the Mortgaged Property has been or will be purchased with the proceeds of any illegal activity.

11.

USE OF PROPERTY.  Unless required by applicable law, Borrower shall not (a) except for any change in use approved by Lender, allow changes in the use for which all or any part of the Mortgaged Property is being used at the time this Instrument was executed, (b) convert any individual dwelling units or common areas to commercial use, (c) initiate or acquiesce in a change in the zoning classification of the Mortgaged Property, or (d) establish any condominium or cooperative regime with respect to the Mortgaged Property.

12.

PROTECTION OF LENDER'S SECURITY.

(a)

If Borrower fails to perform any of its obligations under this Instrument or any other Loan Document, or if any action or proceeding is commenced which purports to affect the Mortgaged Property, Lender's security or Lender's rights under this Instrument, including eminent domain, insolvency, code enforcement, civil or criminal forfeiture, enforcement of Hazardous Materials Laws, fraudulent conveyance or reorganizations or proceedings involving a bankrupt or decedent, then Lender at Lender's option may make such appearances, disburse such sums and take such actions as Lender reasonably deems necessary to perform such obligations of Borrower and to protect Lender's interest, including (1) payment of fees and out-of-pocket expenses of attorneys, accountants, inspectors and consultants, (2) entry upon the Mortgaged Property to make repairs or secure the Mortgaged Property, (3) procurement of the insu rance required by Section 19, and (4) payment of amounts which Borrower has failed to pay under Sections 15 and 17.

(b)

Any amounts disbursed by Lender under this Section 12, or under any other provision of this Instrument that treats such disbursement as being made under this Section 12, shall be added to, and become part of, the principal component of the Indebtedness, shall be immediately due and payable and shall bear interest from the date of disbursement until paid at the "Default Rate", as defined in the Note.

(c)

Nothing in this Section 12 shall require Lender to incur any expense or take any action.

13.

INSPECTION.  Lender, its agents, representatives, and designees may make or cause to be made entries upon and inspections of the Mortgaged Property (including environmental inspections and tests) during normal business hours, or at any other reasonable time.

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14.

BOOKS AND RECORDS; FINANCIAL REPORTING.

(a)

Borrower shall keep and maintain at all times at the Mortgaged Property or the management agent's offices, and upon Lender's request shall make available at the Mortgaged Property, complete and accurate books of account and records (including copies of supporting bills and invoices) adequate to reflect correctly the operation of the Mortgaged Property, and copies of all written contracts, Leases, and other instruments which affect the Mortgaged Property.  The books, records, contracts, Leases and other instruments shall be subject to examination and inspection at any reasonable time by Lender.

(b)

Borrower shall furnish to Lender all of the following:

(1)

within 120 days after the end of each fiscal year of Borrower, a statement of income and expenses for Borrower's operation of the Mortgaged Property for that fiscal year, a statement of changes in financial position of Borrower relating to the Mortgaged Property for that fiscal year and, when requested by Lender, a balance sheet showing all assets and liabilities of Borrower relating to the Mortgaged Property as of the end of that fiscal year;

(2)

within 120 days after the end of each fiscal year of Borrower, and at any other time upon Lender's request, a rent schedule for the Mortgaged Property showing the name of each tenant, and for each tenant, the space occupied, the lease expiration date, the rent payable for the current month, the date through which rent has been paid, and any related information requested by Lender;

(3)

within 120 days after the end of each fiscal year of Borrower, and at any other time upon Lender's request, an accounting of all security deposits held pursuant to all Leases, including the name of the institution (if any) and the names and identification numbers of the accounts (if any) in which such security deposits are held and the name of the person to contact at such financial institution, along with any authority or release necessary for Lender to access information regarding such accounts;

(4)

within 120 days after the end of each fiscal year of Borrower, and at any other time upon Lender's request, a statement that identifies all owners of any interest in Borrower and the interest held by each, if Borrower is a corporation, all officers and directors of Borrower, and if Borrower is a limited liability company, all managers who are not members;

(5)

upon Lender's request, a monthly property management report for the Mortgaged Property, showing the number of inquiries made and rental applications received from tenants or prospective tenants and deposits received from tenants and any other information requested by Lender;

(6)

upon Lender's request, a balance sheet, a statement of income and expenses for Borrower and a statement of changes in financial position of Borrower for Borrower's most recent fiscal year; and

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(7)

if required by Lender, a statement of income and expense for the Mortgaged Property for the prior month or quarter.

(c)

Each of the statements, schedules and reports required by Section 14(b) shall be certified to be complete and accurate by an individual having authority to bind Borrower, and shall be in such form and contain such detail as Lender may reasonably require.  Lender also may require that any statements, schedules or reports be audited at Borrower's expense by independent certified public accountants acceptable to Lender.

(d)

If Borrower fails to provide in a timely manner the statements, schedules and reports required by Section 14(b), Lender shall have the right to have Borrower's books and records audited, at Borrower’s expense, by independent certified public accountants selected by Lender in order to obtain such statements, schedules and reports, and all related costs and expenses of Lender shall become immediately due and payable and shall become an additional part of the Indebtedness as provided in Section 12.

(e)

If an Event of Default has occurred and is continuing, Borrower shall deliver to Lender upon written demand all books and records relating to the Mortgaged Property or its operation.

(f)

Borrower authorizes Lender to obtain a credit report on Borrower at any time.

(g)

If an Event of Default has occurred and Lender has not previously required Borrower to furnish a quarterly statement of income and expense for the Mortgaged Property, Lender may require Borrower to furnish such a statement within 45 days after the end of each fiscal quarter of Borrower following such Event of Default.

15.

TAXES; OPERATING EXPENSES.

(a)

Subject to the provisions of Section 15(c) and Section 15(d), Borrower shall pay, or cause to be paid, all Taxes when due and before the addition of any interest, fine, penalty  or cost for nonpayment.  

(b)

Subject to the provisions of Section 15(c), Borrower shall pay the expenses of operating, managing, maintaining and repairing the Mortgaged Property (including insurance premiums, utilities, repairs and replacements) before the last date upon which each such payment may be made without any penalty or interest charge being added.

(c)

As long as no Event of Default exists and Borrower has timely delivered to Lender any bills or premium notices that it has received, Borrower shall not be obligated to pay Taxes, insurance premiums or any other individual Imposition to the extent that sufficient Imposition Deposits are held by Lender for the purpose of paying that specific Imposition.  If an Event of Default exists, Lender may exercise any rights Lender may have with respect to Imposition Deposits without regard to whether Impositions are then due and payable.  Lender shall have no liability to Borrower for failing to pay any Impositions to the extent that any Event of Default has occurred and is continuing, insufficient Imposition Deposits are held by Lender at the time an Imposition becomes due and payable or Borrower has failed to provide Lender with bills and premium notices as provided above.

(d)

Borrower, at its own expense, may contest by appropriate legal proceedings, conducted diligently and in good faith, the amount or validity of any Imposition other than

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insurance premiums, if (1) Borrower notifies Lender of the commencement or expected commencement of such proceedings, (2) the Mortgaged Property is not in danger of being sold or forfeited, (3) Borrower deposits with Lender reserves sufficient to pay the contested Imposition, if requested by Lender, and (4) Borrower furnishes whatever additional security is required in the proceedings or is reasonably requested by Lender, which may include the delivery to Lender of the reserves established by Borrower to pay the contested Imposition.

(e)

Borrower shall promptly deliver to Lender a copy of all notices of, and invoices for, Impositions, and if Borrower pays any Imposition directly, Borrower shall promptly furnish to Lender receipts evidencing such payments.

16.

LIENS; ENCUMBRANCES.  Borrower acknowledges that, to the extent provided in Section 21, the grant, creation or existence of any mortgage, deed of trust, deed to secure debt, security interest or other lien, privilege or encumbrance (a "Lien") on the Mortgaged Property (other than the lien of this Instrument) or on certain ownership interests in Borrower, whether voluntary, involuntary or by operation of law, and whether or not such Lien has priority over the lien of this Instrument, is a "Transfer" which constitutes an Event of Default.

17.

PRESERVATION, MANAGEMENT AND MAINTENANCE OF MORTGAGED PROPERTY.  

(a)

Borrower (1) shall not commit waste or permit impairment or deterioration of the Mortgaged Property, (2) shall not abandon the Mortgaged Property, (3) shall restore or repair promptly, in a good and workmanlike manner, any damaged part of the Mortgaged Property to the equivalent of its original condition, or such other condition as Lender may approve in writing, whether or not insurance proceeds or condemnation awards are available to cover any costs of such restoration or repair, (4) shall keep the Mortgaged Property in good repair, including the replacement of Personalty and Fixtures with items of equal or better function and quality, (5) shall provide for professional management of the Mortgaged Property by a residential rental property manager satisfactory to Lender under a contract approved by Lender in writing, and (6) shall give notice to Lender of and, unless otherwise directed in writing by Lender, shall appear in and defend any action or proceeding purporting to affect the Mortgaged Property, Lender's security or Lender's rights under this Instrument.  Borrower shall not (and shall not permit any tenant or other person to) remove, demolish or alter the Mortgaged Property or any part of the Mortgaged Property except in connection with the replacement of tangible Personalty.

(b)

If, in connection with the making of the loan evidenced by the Note or at any later date, Lender waives in writing the requirement of Section 17(a)(5) above that Borrower enter into a written contract for management of the Mortgaged Property and if, after the date of this Instrument, Borrower intends to change the management of the Mortgaged Property, Lender shall have the right to approve such new property manager and the written contract for the management of the Mortgaged Property and require that Borrower and such new property manager enter into an Assignment of Management Agreement on a form approved by Lender.  If required by Lender (whether before or after an Event of Default), Borrower will cause any Affiliate of Borrower to whom fees are payable for the management of the Mortgaged Property to enter into an agreement with Lender, in a form approved by Lender, providing for subordinat ion of those fees and such other provisions as Lender may require.  "Affiliate of Borrower" means any corporation, partnership, joint venture, limited liability company, limited liability partnership, trust or individual controlled by, under common control with, or which controls Borrower (the term "control" for these purposes shall mean the ability, whether by the ownership of shares or other equity interests, by

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contract or otherwise, to elect a majority of the directors of a corporation, to make management decisions on behalf of, or independently to select the managing partner of, a partnership, or otherwise to have the power independently to remove and then select a majority of those individuals exercising managerial authority over an entity, and control shall be conclusively presumed in the case of the ownership of 50% or more of the equity interests).

18.

ENVIRONMENTAL HAZARDS.

(a)

Except for matters covered by a written program of operations and maintenance approved in writing by Lender (an "O&M Program") or matters described in Section 18(b), Borrower shall not cause or permit any of the following:

(1)

the presence, use, generation, release, treatment, processing, storage (including storage in above ground and underground storage tanks), handling, or disposal of any Hazardous Materials on or under the Mortgaged Property or any other  property of Borrower that is adjacent to the Mortgaged Property;

(2)

the transportation of any Hazardous Materials to, from, or across the Mortgaged Property;

(3)

any occurrence or condition on the Mortgaged Property or any other property of Borrower that is adjacent to the Mortgaged Property, which occurrence or condition is or may be in violation of Hazardous Materials Laws; or

(4)

any violation of or noncompliance with the terms of any Environmental Permit with respect to the Mortgaged Property or any  property of Borrower that is adjacent to the Mortgaged Property.

The matters described in clauses (1) through (4) above are referred to collectively in this Section 18 as "Prohibited Activities or Conditions".

(b)

Prohibited Activities and Conditions shall not include the safe and lawful use and storage of quantities of (1) pre-packaged supplies, cleaning materials and petroleum products customarily used in the operation and maintenance of comparable multifamily properties, (2) cleaning materials, personal grooming items and other items sold in pre-packaged containers for consumer use and used by tenants and occupants of residential dwelling units in the Mortgaged Property; and (3) petroleum products used in the operation and maintenance of motor vehicles from time to time located on the Mortgaged Property’s parking areas, so long as all of the foregoing are used, stored, handled, transported and disposed of in compliance with Hazardous Materials Laws.

(c)

Borrower shall take all commercially reasonable actions (including the inclusion of appropriate provisions in any Leases executed after the date of this Instrument) to prevent its employees, agents, and contractors, and all tenants and other occupants from causing or permitting any Prohibited Activities or Conditions.  Borrower shall not lease or allow the sublease or use of all or any portion of the Mortgaged Property to any tenant or subtenant for nonresidential use by any user that, in the ordinary course of its business, would cause or permit any Prohibited Activity or Condition.

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(d)

If an O&M Program has been established with respect to Hazardous Materials, Borrower shall comply in a timely manner with, and cause all employees, agents, and contractors of Borrower and any other persons present on the Mortgaged Property to comply with the O&M Program.  All costs of performance of Borrower's obligations under any O&M Program shall be paid by Borrower, and Lender's out-of-pocket costs incurred in connection with the monitoring and review of the O&M Program and Borrower's performance shall be paid by Borrower upon demand by Lender.  Any such out-of-pocket costs of Lender which Borrower fails to pay promptly shall become an additional part of the Indebtedness as provided in Section 12.

(e)

Borrower represents and warrants to Lender that, except as previously disclosed by Borrower to Lender in writing:

(1)

Borrower has not at any time engaged in, caused or permitted any Prohibited Activities or Conditions;

(2)

to the best of Borrower's knowledge after reasonable and diligent inquiry, no Prohibited Activities or Conditions exist or have existed;

(3)

except to the extent previously disclosed by Borrower to Lender in writing, the Mortgaged Property does not now contain any underground storage tanks, and, to the best of Borrower’s knowledge after reasonable and diligent inquiry, the Mortgaged Property has not contained any underground storage tanks in the past.  If there is an underground storage tank located on the Property which has been previously disclosed by Borrower to Lender in writing, that tank complies with all requirements of Hazardous Materials Laws;

(4)

Borrower has complied with all Hazardous Materials Laws, including all requirements for notification regarding releases of Hazardous Materials.  Without limiting the generality of the foregoing, Borrower has obtained all Environmental Permits required for the operation of the Mortgaged Property in accordance with Hazardous Materials Laws now in effect and all such Environmental Permits are in full force and effect;  

(5)

no event has occurred with respect to the Mortgaged Property that constitutes, or with the passing of time or the giving of notice would constitute, noncompliance with the terms of any Environmental Permit;

(6)

there are no actions, suits, claims or proceedings pending or, to the best of Borrower’s knowledge after reasonable and diligent inquiry, threatened  that involve the Mortgaged Property and allege, arise out of, or relate to any Prohibited Activity or Condition; and

(7)

Borrower has not received any complaint, order, notice of violation or other communication from any Governmental Authority with regard to air emissions, water discharges, noise emissions or Hazardous Materials, or any other environmental, health or safety matters affecting the Mortgaged Property or any other property of Borrower that is adjacent to the Mortgaged Property.

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The representations and warranties in this Section 18 shall be continuing representations and warranties that shall be deemed to be made by Borrower throughout the term of the loan evidenced by the Note, until the Indebtedness has been paid in full.

(f)

Borrower shall promptly notify Lender in writing upon the occurrence of any of  the following events:

(1)

Borrower's discovery of any Prohibited Activity or Condition;

(2)

Borrower’s receipt of or knowledge of any complaint, order, notice of violation or other communication from any Governmental Authority or other person with regard to present or future alleged Prohibited Activities or Conditions or any other environmental, health or safety matters affecting the Mortgaged Property or any other property of Borrower that is adjacent to the Mortgaged Property; and  

(3)

any representation or warranty in this Section 18 becomes untrue after the date of this Agreement.

Any such notice given by Borrower shall not relieve Borrower of, or result in a waiver of, any obligation under this Instrument, the Note, or any other Loan Document.

(g)

Borrower shall pay promptly the costs of any environmental inspections, tests or audits ("Environmental Inspections") required by Lender in connection with any foreclosure or deed in lieu of foreclosure, or as a condition of Lender’s consent to any Transfer under Section 21, or required by Lender following a reasonable determination by Lender that Prohibited Activities or Conditions may exist.  Any such costs incurred by Lender (including the fees and out-of-pocket costs of attorneys and technical consultants whether incurred in connection with any judicial or administrative process or otherwise) which Borrower fails to pay promptly shall become an additional part of the Indebtedness as provided in Section 12.  The results of all Environmental Inspections made by Lender shall at all times remain the property of Lender and Lender shall have no obligation t o disclose or otherwise make available to Borrower or any other party such results or any other information obtained by Lender in connection with its Environmental Inspections.  Lender hereby reserves the right, and Borrower hereby expressly authorizes Lender, to make available to any party, including any prospective bidder at a foreclosure sale of the Mortgaged Property, the results of any Environmental Inspections made by Lender with respect to the Mortgaged Property.  Borrower consents to Lender notifying any party (either as part of a notice of sale or otherwise) of the results of any of Lender's Environmental Inspections.  Borrower acknowledges that Lender cannot control or otherwise assure the truthfulness or accuracy of the results of any of its Environmental Inspections and that the release of such results to prospective bidders at a foreclosure sale of the Mortgaged Property may have a material and adverse effect upon the amount which a party may bid at such sale.  Borrower agree s that Lender shall have no liability whatsoever as a result of delivering the results of any of its Environmental Inspections to any third party, and Borrower hereby releases and forever discharges Lender from any and all claims, damages, or causes of action, arising out of, connected with or incidental to the results of, the delivery of any of Lender's Environmental Inspections.

(h)

If any investigation, site monitoring, containment, clean-up, restoration or other remedial work ("Remedial Work") is necessary to comply with any Hazardous Materials Law or order of any Governmental Authority that has or acquires jurisdiction over the Mortgaged

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Property  or the use, operation or improvement of the Mortgaged Property under any Hazardous Materials Law, Borrower shall, by the earlier of (1) the applicable deadline required by Hazardous Materials Law or (2) 30 days after notice from Lender demanding such action, begin performing the Remedial Work, and thereafter diligently prosecute it to completion, and shall in any event complete the work by the time required by applicable Hazardous Materials Law.  If Borrower fails to begin on a timely basis or diligently prosecute any required Remedial Work, Lender may, at its option, cause the Remedial Work to be completed, in which case Borrower shall reimburse Lender on demand for the cost of doing so.  Any reimbursement due from Borrower to Lender shall become part of the Indebtedness as provided in Section 12.

(i)

Borrower shall cooperate with any inquiry by any Governmental Authority and shall comply with any governmental or judicial order which arises from any alleged Prohibited Activity or Condition.

(j)

Borrower shall indemnify, hold harmless and defend (i) Lender, (ii) any prior owner or holder of the Note, (iii) the Loan Servicer, (iv) any prior Loan Servicer, (v) the officers, directors, shareholders, partners, employees and trustees of any of the foregoing, and (vi) the heirs, legal representatives, successors and assigns of each of the foregoing (collectively, the "Indemnitees") from and against all proceedings, claims, damages, penalties and costs (whether initiated or sought by Governmental Authorities or private parties), including fees and out-of-pocket expenses of attorneys and expert witnesses, investigatory fees, and remediation costs, whether incurred in connection with any judicial or administrative process or otherwise, arising directly or indirectly from any of the following:

(1)

any breach of any representation or warranty of Borrower in this Section 18;  

(2)

any failure by Borrower to perform any of its obligations under this Section 18;

(3)

the existence or alleged existence of any Prohibited Activity or Condition;

(4)

the presence or alleged presence of Hazardous Materials on or under the Mortgaged Property or any property of Borrower that is adjacent to the Mortgaged Property; and

(5)

the actual or alleged violation of any Hazardous Materials Law.  

(k)

Counsel selected by Borrower to defend Indemnitees shall be subject to the  approval of those Indemnitees.  However, any Indemnitee may elect to defend any claim or legal or administrative proceeding at the Borrower’s expense.  

(l)

Borrower shall not, without the prior written consent of those Indemnitees who are named as parties to a claim or legal or administrative proceeding (a "Claim"), settle or compromise the Claim if the settlement (1) results in the entry of any judgment that does not include as an unconditional term the delivery by the claimant or plaintiff to Lender of a written release of those Indemnitees, satisfactory in form and substance to Lender; or (2) may materially and adversely affect Lender, as determined by Lender in its discretion.

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(m)

Lender agrees that the indemnity under this Section 18 shall be limited to the assets of Borrower and Lender shall not seek to recover any deficiency from any natural persons who are general partners of Borrower.

(n)

Borrower shall, at its own cost and expense, do all of the following:

(1)

pay or satisfy any judgment or decree that may be entered against any Indemnitee or Indemnitees in any legal or administrative proceeding incident to any matters against which Indemnitees are entitled to be indemnified under this Section 18;

(2)

reimburse Indemnitees for any expenses paid or incurred in connection with any matters against which Indemnitees are entitled to be indemnified under this Section 18; and

(3)

reimburse Indemnitees for any and all expenses, including fees and out-of-pocket expenses of attorneys and expert witnesses, paid or incurred in connection with the enforcement by Indemnitees of their rights under this Section 18, or in monitoring and participating in any legal or administrative proceeding.

(o)

In any circumstances in which the indemnity under this Section 18 applies, Lender may employ its own legal counsel and consultants to prosecute, defend or negotiate any claim or legal or administrative proceeding and Lender, with the prior written consent of Borrower (which shall not be unreasonably withheld, delayed or conditioned), may settle or compromise any action or legal or administrative proceeding.  Borrower shall reimburse Lender upon demand for all costs and expenses incurred by Lender, including all costs of settlements entered into in good faith, and the fees and out-of-pocket expenses of such attorneys and consultants.

(p)

The provisions of this Section 18 shall be in addition to any and all other obligations and liabilities that Borrower may have  under applicable law or under other Loan Documents, and each Indemnitee shall be entitled to indemnification under this Section 18 without regard to whether Lender or that Indemnitee has exercised any rights against the Mortgaged Property or any other security, pursued any rights against any guarantor, or pursued any other rights available under the Loan Documents or applicable law. If Borrower consists of more than one person or entity, the obligation of those persons or entities to indemnify the Indemnitees under this Section 18 shall be solidary.  The obligation of Borrower to indemnify the Indemnitees under this Section 18 shall survive any repayment or discharge of the Indebtedness, any foreclosure proceeding, any foreclosure sale, any delivery of any deed in lieu of foreclosure, and any release of record of the lien of this Instrument.

19.

PROPERTY AND LIABILITY INSURANCE.

(a)

Borrower shall keep the Improvements insured at all times against such hazards as Lender may from time to time require, which insurance shall include but not be limited to coverage against loss by fire and allied perils, general boiler and machinery coverage, and business income coverage.  Lender’s insurance requirements may change from time to time throughout the term of the Indebtedness.  If Lender so requires, such insurance shall also include sinkhole insurance, mine subsidence insurance, earthquake insurance, and, if the Mortgaged Property does not conform to applicable zoning or land use laws, building ordinance or law

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coverage.  If any of the Improvements is located in an area identified by the Federal Emergency Management Agency (or any successor to that agency) as an area having special flood hazards, and if flood insurance is available in that area, Borrower shall insure such Improvements against loss by flood.

(b)

All premiums on insurance policies required under Section 19(a) shall be paid in the manner provided in Section 7, unless Lender has designated in writing another method of payment.  All such policies shall also be in a form approved by Lender.  All policies of property damage insurance shall include a non-contributing, non-reporting mortgage clause in favor of, and in a form approved by, Lender.  Lender shall have the right to hold the original policies or duplicate original policies of all insurance required by Section 19(a).  Borrower shall promptly deliver to Lender a copy of all renewal and other notices received by Borrower with respect to the policies and all receipts for paid premiums.  At least 30 days prior to the expiration date of a policy, Borrower shall deliver to Lender the original  (or a duplicate original) of a renewal policy in form satisfactory to Lender.

(c)

Borrower shall maintain at all times commercial general liability insurance, workers’ compensation insurance and such other liability, errors and omissions and fidelity insurance coverages as Lender may from time to time require.

(d)

All insurance policies and renewals of insurance policies required by this Section 19 shall be in such amounts and for such periods as Lender may from time to time require, and shall be issued by insurance companies satisfactory to Lender.

(e)

Borrower shall comply with all insurance requirements and shall not permit any condition to exist on the Mortgaged Property that would invalidate any part of any insurance coverage that this Instrument requires Borrower to maintain.

(f)

In the event of loss, Borrower shall give immediate written notice to the insurance carrier and to Lender.  Borrower hereby authorizes and appoints Lender as attorney-in-fact for Borrower to make proof of loss, to adjust and compromise any claims under policies of property damage insurance, to appear in and prosecute any action arising from such property damage insurance policies, to collect and receive the proceeds of property damage insurance, and to deduct from such proceeds Lender’s expenses incurred in the collection of such proceeds.  This power of attorney is coupled with an interest and therefore is irrevocable.  However, nothing contained in this Section 19 shall require Lender to incur any expense or take any action.  Lender may, at Lender’s option, (1) hold the balance of such proceeds to be used to reimburse Borrower for the cost of restoring and rep airing the Mortgaged Property to the equivalent of its original condition or to a condition approved by Lender (the "Restoration"), or (2) apply the balance of such proceeds to the payment of the Indebtedness, whether or not then due. To the extent Lender determines to apply insurance proceeds to Restoration, Lender shall do so in accordance with Lender’s then-current policies relating to the restoration of casualty damage on similar multifamily properties.

(g)

Lender shall not exercise its option to apply insurance proceeds to the payment of the Indebtedness if all of the following conditions are met:  (1) no Event of Default (or any event which, with the giving of notice or the passage of time, or both, would constitute an Event of Default) has occurred and is continuing; (2) Lender determines, in its discretion, that there will be sufficient funds to complete the Restoration; (3) Lender determines, in its discretion, that the rental income from the Mortgaged Property after completion of the Restoration will be sufficient to meet all operating costs and other expenses, Imposition Deposits, deposits to reserves and loan

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repayment obligations relating to the Mortgaged Property; (4) Lender determines, in its discretion, that the Restoration will be completed before the earlier of (A) one year before the maturity date of the Note or (B) one year after the date of the loss or casualty; and (5) upon Lender's request, Borrower provides Lender evidence of the availability during and after the Restoration of the insurance required to be maintained by Borrower pursuant to this Section 19.

(h)

If the Mortgaged Property is sold at a foreclosure sale or Lender acquires title to the Mortgaged Property, Lender shall automatically succeed to all rights of Borrower in and to any insurance policies and unearned insurance premiums and in and to the proceeds resulting from any damage to the Mortgaged Property prior to such sale or acquisition.

20.

CONDEMNATION.

(a)

Borrower shall promptly notify Lender of any action or proceeding relating to any condemnation or other taking, or conveyance in lieu thereof, of all or any part of the Mortgaged Property, whether direct or indirect (a "Condemnation").  Borrower shall appear in and prosecute or defend any action or proceeding relating to any Condemnation unless otherwise directed by Lender in writing.  Borrower authorizes and appoints Lender as attorney-in-fact for Borrower to commence, appear in and prosecute, in Lender’s or Borrower’s name, any action or proceeding relating to any Condemnation and to settle or compromise any claim in connection with any Condemnation.  This power of attorney is coupled with an interest and therefore is irrevocable.  However, nothing contained in this Section 20 shall require Lender to incur any expense or take any action.   ;Borrower hereby transfers and assigns to Lender all right, title and interest of Borrower in and to any award or payment with respect to (i) any Condemnation, or any conveyance in lieu of Condemnation, and (ii) any damage to the Mortgaged Property caused by governmental action that does not result in a Condemnation.

(b)

Lender may apply such awards or proceeds, after the deduction of Lender’s expenses incurred in the collection of such amounts, at Lender’s option, to the restoration or repair of the Mortgaged Property or to the payment of the Indebtedness, with the balance, if any, to Borrower.  Unless Lender otherwise agrees in writing, any application of any awards or proceeds to the Indebtedness shall not extend or postpone the due date of any monthly installments referred to in the Note, Section 7 of this Instrument or any Collateral Agreement, or change the amount of such installments.  Borrower agrees to execute such further evidence of assignment of any awards or proceeds as Lender may require.

21.

TRANSFERS OF THE MORTGAGED PROPERTY OR INTERESTS IN BORROWER.

(a)

The occurrence of any of the following events shall constitute an Event of Default under this Instrument:

(1)

a Transfer of all or any part of the Mortgaged Property or any interest in the Mortgaged Property;

(2)

a Transfer of a Controlling Interest in Borrower;

(3)

a Transfer of a Controlling Interest in any entity which owns, directly or indirectly through one or more intermediate entities, a Controlling Interest in Borrower;

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(4)

a Transfer of all or any part of Key Principal's ownership interests (other than limited partnership interests) in Borrower, or in any other entity which owns, directly or indirectly through one or more intermediate entities, an ownership interest in Borrower;

(5)

if Key Principal is an entity, (A) a Transfer of a Controlling Interest in Key Principal, or (B) a Transfer of a Controlling Interest in any entity which owns, directly or indirectly through one or more intermediate entities, a Controlling Interest in Key Principal;

(6)

if Borrower or Key Principal is a trust, the termination or revocation of such trust; and

(7)

a conversion of Borrower from one type of legal entity into another type of legal entity, whether or not there is a Transfer.

Lender shall not be required to demonstrate any actual impairment of its security or any increased risk of default in order to exercise any of its remedies with respect to an Event of Default under this Section 21.

(b)

The occurrence of any of the following events shall not constitute an Event of Default under this Instrument, notwithstanding any provision of Section 21(a) to the contrary:

(1)

a Transfer to which Lender has consented;

(2)

a Transfer that occurs by devise, descent, or by operation of law upon the death of a natural person;

(3)

the grant of a leasehold interest in an individual dwelling unit for a term of two years or less not containing an option to purchase;

(4)

a Transfer of obsolete or worn out Personalty or Fixtures that are contemporaneously replaced by items of equal or better function and quality, which are free of liens, encumbrances and security interests other than those created by the Loan Documents or consented to by Lender;

(5)

the grant of an easement, if before the grant Lender determines that the easement will not materially affect the operation or value of the Mortgaged Property or Lender’s interest in the Mortgaged Property, and Borrower pays to Lender, upon demand, all costs and expenses incurred by Lender in connection with reviewing Borrower’s request; and

(6)

the creation of a tax lien or a mechanic’s, materialman’s or judgment lien against the Mortgaged Property which is bonded off, released of record or otherwise remedied to Lender’s satisfaction within 30 days of the date of creation.

(c)

Lender shall consent, without any adjustment to the rate at which the Indebtedness secured by this Instrument bears interest or to any other economic terms of the

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Indebtedness, to a Transfer that would otherwise violate this Section 21 if, prior to the Transfer, Borrower has satisfied each of the following requirements:

(1)

the submission to Lender of all information required by Lender to make the determination required by this Section 21(c);

(2)

the absence of any Event of Default;

(3)

the transferee meets all of the eligibility, credit, management and other standards (including any standards with respect to previous relationships between Lender and the transferee and the organization of the transferee) customarily applied by Lender at the time of the proposed Transfer to the approval of borrowers in connection with the origination or purchase of similar mortgages, deeds of trust or deeds to secure debt on multifamily properties;

(4)

the Mortgaged Property, at the time of the proposed Transfer, meets all standards as to its physical condition that are customarily applied by Lender at the time of the proposed Transfer to the approval of properties in connection with the origination or purchase of similar mortgages on multifamily properties;

(5)

in the case of a Transfer of all or any part of the Mortgaged Property, or direct or indirect ownership interests in Borrower or Key Principal (if an entity), if transferor or any other person has obligations under any Loan Document, the execution by the transferee or one or more individuals or entities acceptable to Lender of an assumption agreement (including, if applicable, an Acknowledgement and Agreement of Key Principal to Personal Liability for Exceptions to Non-Recourse Liability) that is acceptable to Lender and that, among other things, requires the transferee to perform all obligations of transferor or such person set forth in such Loan Document, and may require that the transferee comply with any provisions of this Instrument or any other Loan Document which previously may have been waived by Lender;

(6)

if a guaranty has been executed and delivered in connection with the Note, this Instrument or any of the other Loan Documents, the Borrower causes one or more individuals or entities acceptable to Lender to execute and deliver to Lender a guaranty in a form acceptable to Lender; and

(7)

Lender’s receipt of all of the following:

(A)

a non-refundable review fee in the amount of $3,000 and a transfer fee equal to 1 percent of the outstanding Indebtedness immediately prior to the Transfer.

(B)

In addition, Borrower shall be required to reimburse Lender for all of Lender's out-of-pocket costs (including reasonable attorneys’ fees) incurred in reviewing the Transfer request, to the extent such expenses exceed $3,000.

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(d)

For purposes of this Section, the following terms shall have the meanings set forth below:

(1)

"Initial Owners" means, with respect to Borrower or any other entity, the persons or entities who on the date of the Note own in the aggregate 100% of the ownership interests in Borrower or that entity.

(2)

A Transfer of a "Controlling Interest" shall mean, with respect to any entity, the following:

(i)

if such entity is a general partnership or a joint venture, a Transfer of any general partnership interest or joint venture interest which would cause the Initial Owners to own less than 51% of all general partnership or joint venture interests in such entity;

(ii)

if such entity is a limited partnership, a Transfer of any general partnership interest;

(iii)

if such entity is a limited liability company or a limited liability partnership, a Transfer of any membership or other ownership interest which would cause the Initial Owners to own less than 51% of all membership or other ownership interests in such entity;

(iv)

if such entity is a corporation (other than a Publicly-Held Corporation) with only one class of voting stock, a Transfer of any voting stock which would cause the Initial Owners to own less than 51% of voting stock in such corporation;

(v)

if such entity is a corporation (other than a Publicly-Held Corporation) with more than one class of voting stock, a Transfer of any voting stock which would cause the Initial Owners to own less than a sufficient number of shares of voting stock having the power to elect the majority of directors of such corporation; and

(vi)

if such entity is a trust, the removal, appointment or substitution of a trustee of such trust other than (A) in the case of a land trust, or (B) if the trustee of such trust after such removal, appointment or substitution is a trustee identified in the trust agreement approved by Lender.

(3)

"Publicly-Held Corporation" shall mean a corporation the outstanding voting stock of which is registered under Section 12(b) or 12(g) of the Securities and Exchange Act of 1934, as amended.

22.

EVENTS OF DEFAULT.  The occurrence of any one or more of the following shall constitute an Event of Default under this Instrument:

(a)

any failure by Borrower to pay or deposit when due any amount required by the Note, this Instrument or any other Loan Document;

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(b)

any failure by Borrower to maintain the insurance coverage required by Section 19;

(c)

any failure by Borrower to comply with the provisions of Section 33;

(d)

fraud or material misrepresentation or material omission by Borrower, or any of its officers, directors, trustees, general partners or managers, Key Principal or any guarantor in connection with (A) the application for or creation of the Indebtedness, (B) any financial statement, rent roll, or other report or information provided to Lender during the term of the Indebtedness, or (C) any request for Lender’s consent to any proposed action, including a request for disbursement of funds under any Collateral Agreement;

(e)

any Event of Default under Section 21;

(f)

the commencement of a forfeiture action or proceeding, whether civil or criminal, which, in Lender’s reasonable judgment, could result in a forfeiture of the Mortgaged Property or otherwise materially impair the lien created by this Instrument or Lender’s interest in the Mortgaged Property;

(g)

any failure by Borrower to perform any of its obligations under this Instrument (other than those specified in Sections 22(a) through (f)), as and when required, which continues for a period of 30 days after notice of such failure by Lender to Borrower, but no such notice or grace period shall apply in the case of any such failure which could, in Lender’s judgment, absent immediate exercise by Lender of a right or remedy under this Instrument, result in harm to Lender, impairment of the Note or this Instrument or any other security given under any other Loan Document;

(h)

any failure by Borrower to perform any of its obligations as and when required under any Loan Document other than this Instrument which continues beyond the applicable cure period, if any, specified in that Loan Document; and

(i)

any exercise by the holder of any other debt instrument secured by a mortgage, deed of trust or deed to secure debt on the Mortgaged Property of a right to declare all amounts due under that debt instrument immediately due and payable.

23.

REMEDIES CUMULATIVE.  Each right and remedy provided in this Instrument is distinct from all other rights or remedies under this Instrument or any other Loan Document or afforded by applicable law, and each shall be cumulative and may be exercised concurrently, independently, or successively, in any order.

24.

FORBEARANCE.

(a)

Lender may (but shall not be obligated to) agree with Borrower, from time to time, and without giving notice to, or obtaining the consent of, or having any effect upon the obligations of, any guarantor or other third party obligor, to take any of the following actions:  extend the time for payment of all or any part of the Indebtedness; reduce the payments due under this Instrument, the Note, or any other Loan Document; release anyone liable for the payment of any amounts under this Instrument, the Note, or any other Loan Document; accept a renewal of the Note; modify the terms and time of payment of the Indebtedness; join in any extension or subordination agreement; release any Mortgaged Property; take or release other or additional security; modify the rate of interest or period of amortization of the Note or change the

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amount of the monthly installments payable under the Note; and otherwise modify this Instrument, the Note, or any other Loan Document.

(b)

Any forbearance by Lender in exercising any right or remedy under the Note, this Instrument, or any other Loan Document or otherwise afforded by applicable law, shall not be a waiver of or preclude the exercise of any other right or remedy.  The acceptance by Lender of payment of all or any part of the Indebtedness after the due date of such payment, or in an amount which is less than the required payment, shall not be a waiver of Lender’s right to require prompt payment when due of all other payments on account of the Indebtedness or to exercise any remedies for any failure to make prompt payment. Enforcement by Lender of any security for the Indebtedness shall not constitute an election by Lender of remedies so as to preclude the exercise of any other right available to Lender.  Lender’s receipt of any awards or proceeds under Sections 19 and 20 shall not operate to cure or waive any Event of Default.

25.

LOAN CHARGES.  If any applicable law limiting the amount of interest or other charges permitted to be collected from Borrower is interpreted so that any charge provided for in any Loan Document, whether considered separately or together with other charges levied in connection with any other Loan Document, violates that law, and Borrower is entitled to the benefit of that law, that charge is hereby reduced to the extent necessary to eliminate that violation.  The amounts, if any, previously paid to Lender in excess of the permitted amounts shall be applied by Lender to reduce the principal of the Indebtedness.  For the purpose of determining whether any applicable law limiting the amount of interest or other charges permitted to be collected from Borrower has been violated, all Indebtedness which constitutes interest, as well as all other charges le vied in connection with the Indebtedness which constitute interest, shall be deemed to be allocated and spread over the stated term of the Note.  Unless otherwise required by applicable law, such allocation and spreading shall be effected in such a manner that the rate of interest so computed is uniform throughout the stated term of the Note.

26.

WAIVER OF STATUTE OF LIMITATIONS.  Borrower hereby waives the right to assert any statute of limitations as a bar to the enforcement of the lien of this Instrument or to any action brought to enforce any Loan Document.

27.

WAIVER OF MARSHALLING. Notwithstanding the existence of any other security interests in the Mortgaged Property held by Lender or by any other party, Lender shall have the right to determine the order in which any or all of the Mortgaged Property shall be subjected to the remedies provided in this Instrument, the Note, any other Loan Document or applicable law.  Lender shall have the right to determine the order in which any or all portions of the Indebtedness are satisfied from the proceeds realized upon the exercise of such remedies.  Borrower and any party who now or in the future acquires a security interest in the Mortgaged Property and who has actual or constructive notice of this Instrument waives any and all right to require the marshalling of assets or to require that any of the Mortgaged Property be sold in the inverse order of alienation or that any of the Mortgaged Pro perty be sold in parcels or as an entirety in connection with the exercise of any of the remedies permitted by applicable law or provided in this Instrument.

28.

FURTHER ASSURANCES.  Borrower shall execute, acknowledge, and deliver, at its sole cost and expense, all further acts, deeds, conveyances, assignments, estoppel certificates, financing statements, transfers and assurances as Lender may require from time to time in order to better assure, grant, and convey to Lender the rights intended to be granted, now or in the future, to Lender under this Instrument and the Loan Documents.

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29.

ESTOPPEL CERTIFICATE.  Within 10 days after a request from Lender, Borrower shall deliver to Lender a written statement, signed and acknowledged by Borrower, certifying to Lender or any person designated by Lender, as of the date of such statement, (i) that the Loan Documents are unmodified and in full force and effect  (or, if there have been modifications, that the Loan Documents are in full force and effect as modified and setting forth such modifications); (ii) the unpaid principal balance of the Note; (iii) the date to which interest under the Note has been paid; (iv) that Borrower is not in default in paying the Indebtedness or in performing or observing any of the covenants or agreements contained in this Instrument or any of the other Loan Documents (or, if the Borrower is in default, describing such default in reasonable detail); (v) whether or not there are then existin g any setoffs or defenses known to Borrower against the enforcement of any right or remedy of Lender under the Loan Documents; and (vi) any additional facts requested by Lender.

30.

GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE.

(a)

This Instrument, and any Loan Document which does not itself expressly identify the law that is to apply to it, shall be governed by the laws of the jurisdiction in which the Land is located (the "Property Jurisdiction").

(b)

Borrower agrees that any controversy arising under or in relation to the Note, this Instrument, or any other Loan Document shall be litigated exclusively in the Property Jurisdiction.  The state and federal courts and authorities with jurisdiction in the Property Jurisdiction shall have exclusive jurisdiction over all controversies which shall arise under or in relation to the Note, any security for the Indebtedness, or any other Loan Document.  Borrower irrevocably consents to service, jurisdiction, and venue of such courts for any such litigation and waives any other venue to which it might be entitled by virtue of domicile, habitual residence or otherwise.

31.

NOTICE.

(a)

All notices, demands and other communications ("notice") under or concerning this Instrument shall be in writing.  Each notice shall be addressed to the intended recipient at its address set forth in this Instrument, and shall be deemed given on the earliest to occur of (1) the date when the notice is received by the addressee; (2) the first Business Day after the notice is delivered to a recognized overnight courier service, with arrangements made for payment of charges for next Business Day delivery; or (3) the third Business Day after the notice is deposited in the United States mail with postage prepaid, certified mail, return receipt requested.  As used in this Section 31, the term "Business Day" means any day other than a Saturday, a Sunday or any other day on which Lender is not open for business.

(b)

Any party to this Instrument may change the address to which notices intended for it are to be directed by means of notice given to the other party in accordance with this Section 31.  Each party agrees that it will not refuse or reject delivery of any notice given in accordance with this Section 31, that it will acknowledge, in writing, the receipt of any notice upon request by the other party and that any notice rejected or refused by it shall be deemed for purposes of this Section 31 to have been received by the rejecting party on the date so refused or rejected, as conclusively established by the records of the U.S. Postal Service or the courier service.

(c)

Any notice under the Note and any other Loan Document which does not specify how notices are to be given shall be given in accordance with this Section 31.

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32.

SALE OF NOTE; CHANGE IN SERVICER.  The Note or a partial interest in the Note (together with this Instrument and the other Loan Documents) may be sold one or more times without prior notice to Borrower.  A sale may result in a change of the Loan Servicer.  There also may be one or more changes of the Loan Servicer unrelated to a sale of the Note.  If there is a change of the Loan Servicer, Borrower will be given notice of the change.

33.

SINGLE ASSET BORROWER.  Until the Indebtedness is paid in full, Borrower (a) shall not acquire any real or personal property other than the Mortgaged Property and personal property related to the operation and maintenance of the Mortgaged Property;  (b) shall not operate any business other than the management and operation of the Mortgaged Property; and (c) shall not maintain its assets in a way difficult to segregate and identify.

34.

SUCCESSORS AND ASSIGNS BOUND.  This Instrument shall bind, and the rights granted by this Instrument shall inure to, the respective successors and assigns of Lender and Borrower.  However, a Transfer not permitted by Section 21 shall be an Event of Default.

35.

JOINT AND SEVERAL LIABILITY.  If more than one person or entity signs this Instrument as Borrower, the obligations of such persons and entities shall be solidary.

36.

RELATIONSHIP OF PARTIES; NO THIRD PARTY BENEFICIARY.

(a)

The relationship between Lender and Borrower shall be solely that of creditor and debtor, respectively, and nothing contained in this Instrument shall create any other relationship between Lender and Borrower.

(b)

No creditor of any party to this Instrument and no other person shall be a third party beneficiary of this Instrument or any other Loan Document.  Without limiting the generality of the preceding sentence, (1) any arrangement (a "Servicing Arrangement") between the Lender and any Loan Servicer for loss sharing or interim advancement of funds shall constitute a contractual obligation of such Loan Servicer that is independent of the obligation of Borrower for the payment of the Indebtedness, (2) Borrower shall not be a third party beneficiary of any Servicing Arrangement, and (3) no payment by the Loan Servicer under any Servicing Arrangement will reduce the amount of the Indebtedness.

37.

SEVERABILITY; AMENDMENTS.  The invalidity or unenforceability of any provision of this Instrument shall not affect the validity or enforceability of any other provision, and all other provisions shall remain in full force and effect.  This Instrument contains the entire agreement among the parties as to the rights granted and the obligations assumed in this Instrument.  This Instrument may not be amended or modified except by a writing signed by the party against whom enforcement is sought.

38.

CONSTRUCTION.  The captions and headings of the sections of this Instrument are for convenience only and shall be disregarded in construing this Instrument.  Any reference in this Instrument to an "Exhibit" or a "Section" shall, unless otherwise explicitly provided, be construed as referring, respectively, to an Exhibit attached to this Instrument or to a Section of this Instrument.  All Exhibits attached to or referred to in this Instrument are incorporated by reference into this Instrument.  Any reference in this Instrument to a statute or regulation shall be construed as referring to that statute or regulation as amended from time to time.  Use of the singular in this Agreement includes the plural and use of the plural includes the singular.  As used in this Instrument, the term "including" means "including, but not l imited to."

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39.

LOAN SERVICING.  All actions regarding the servicing of the loan evidenced by the Note, including the collection of payments, the giving and receipt of notice, inspections of the Property, inspections of books and records, and the granting of consents and approvals, may be taken by the Loan Servicer unless Borrower receives notice to the contrary.  If Borrower receives conflicting notices regarding the identity of the Loan Servicer or any other subject, any such notice from Lender shall govern.

40.

DISCLOSURE OF INFORMATION.  Lender may furnish information regarding Borrower or the Mortgaged Property to third parties with an existing or prospective interest in the servicing, enforcement, evaluation, performance, purchase or securitization of the Indebtedness, including trustees, master servicers, special servicers, rating agencies, and organizations maintaining databases on the underwriting and performance of multifamily mortgage loans.  Borrower irrevocably waives any and all rights it may have under applicable law to prohibit such disclosure, including any right of privacy.

41.

NO CHANGE IN FACTS OR CIRCUMSTANCES.  All information in the application for the loan submitted to Lender (the "Loan Application") and in all financial statements, rent rolls, reports, certificates and other documents submitted in connection with the Loan Application are complete and accurate in all material respects.  There has been no material adverse change in any fact or circumstance that would make any such information incomplete or inaccurate.

42.

SUBROGATION.  If, and to the extent that, the proceeds of the loan evidenced by the Note are used to pay, satisfy or discharge any obligation of Borrower for the payment of money that is secured by a pre-existing mortgage, deed of trust or other lien encumbering the Mortgaged Property (a "Prior Lien"), such loan proceeds shall be deemed to have been advanced by Lender at Borrower’s request, and Lender shall automatically, and without further action on its part, be subrogated to the rights, including lien priority, of the owner or holder of the obligation secured by the Prior Lien, whether or not the Prior Lien is released.

43.

ACCELERATION; FORECLOSURE; CONFESSION OF JUDGMENT.  At any time during the existence of an Event of Default, Lender, at Lender’s option, may accelerate the maturity of and declare the Indebtedness to be immediately due and payable, and may cause the Mortgaged Property and UCC Collateral to be immediately seized and sold, in whole, in part, or separately, whether in term of court or in vacation, under ordinary or executory process, in accordance with applicable Louisiana law, to the highest bidder for cash, with or without appraisement, and without the necessity of making additional demand upon or notifying Borrower or placing Borrower in default, all of which are expressly waived. For purposes of foreclosure under the Louisiana executory process procedures, Borrower confesses judgment and acknowledges to be indebted to and in favor of Lender up to the full amount of the Indebtedn ess, including principal, interest, prepayment premiums, late charges, default interest, costs, expenses, collection attorneys’ fees, and any additional sums that Lender may advance as provided under this Instrument. To the extent permitted under applicable Louisiana law, Borrower additionally waives:  (a) the benefit of appraisal as provided in Articles 2332, 2336, 2723 and 2724 of the Louisiana Code of Civil Procedure, and all other laws with regard to appraisal upon judicial sale; (b) the demand and three (3) days’ delay as provided under Articles 2639 and 2721 of the Louisiana Code of Civil Procedure; (c) the notice of seizure as provided under Articles 2293 and 2721 of the Louisiana Code of Civil Procedure; (d) the three (3) days’ delay provided under Articles 2331 and 2722 of the Louisiana Code of Civil Procedure; and (e) all other benefits provided under Articles 2331, 2722 and 2723 of the Louisiana Code of Civil Procedure and all other articles not specifically mentioned above. Bo rrower agrees that Lender

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shall have all of the additional enforcement rights and remedies of a secured party under the Louisiana Commercial Laws (Louisiana Revised Statutes, Title 10) and under the Uniform Commercial Code of any applicable state with respect to the UCC Collateral wherever located. Borrower further agrees that any declarations of fact made under an authentic act before a Notary Public in the presence of two witnesses, by a person declaring such facts to lie within his or her knowledge, shall constitute authentic evidence for purposes of executory process and also for purposes of Louisiana Revised Statutes, Title 9, Sections 3509.1 and 3504(b)(6), and Title 10, Section 9-508.

44.

RELEASE. Upon payment of the Indebtedness in full, Borrower may request Lender in writing to provide Borrower with the Note marked “Canceled,” or alternatively, at Lender’s option, with a certificate sufficient to permit Borrower to cancel this Instrument from the public records. Borrower agrees that Lender may delay providing the foregoing to Borrower for up to 30 days following receipt of Borrower’s written request. If Borrower requests Lender to perform the necessary services to cancel this Instrument from the public records, Borrower agrees to pay Lender’s reasonable costs incurred in connection with such cancellation.

45.

WAIVER OF HOMESTEAD.  Borrower and Borrower's spouse, if any, waive all homestead and other exemptions from seizure with respect to the Mortgaged Property and the UCC Collateral.

46.

VENDOR'S LIEN MORTGAGE.  If Lender is a savings and loan association, the Note and the other amounts secured by this Instrument shall be secured by a vendor's lien and privilege on and against the Mortgaged Property pursuant to the provisions of Louisiana Revised Statutes, Title 6, Section 833.

47.

ATTORNEYS' FEES.  Whenever referred to in this Instrument, other than in Section 43, "attorneys' fees" shall mean one percent (1%) of the Indebtedness.

48.

MORTGAGE AND CONVEYANCE CERTIFICATES.  The production of Mortgage and conveyance certificates is waived by Lender and Borrower, who release me, Notary, from all liability for nonproduction.

49.

LATE CHARGE.  Borrower shall pay to Lender a late charge of 5% of any monthly installment of principal and interest as provided in the Note not received by Lender within 10 days after that installment is due.

50.

KEEPER OF MORTGAGED PROPERTY.  Pursuant to the provisions of Louisiana Revised Statutes, Title 9, Section 5136, Borrower and Lender covenant and agree that Lender shall have the right to designate a keeper of the Mortgaged Property at the time any seizure of the Mortgaged Property is effected and that Lender may designate itself or its employees, agents or independent contractors as such keeper.  Borrower agrees that the reasonable fees of such a keeper shall be treated as a disbursement made under Section 12 and shall be secured by this Instrument.  At no time has or will Borrower occupy the Mortgaged Property, or any portion of the Mortgaged Property, as its home.

51.

WAIVER OF TRIAL BY JURY.  BORROWER AND LENDER EACH (A) COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS INSTRUMENT OR THE RELATIONSHIP BETWEEN THE PARTIES AS BORROWER AND LENDER THAT IS TRIABLE OF RIGHT BY A JURY AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY WITH

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RESPECT TO SUCH ISSUE TO THE EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN THE FUTURE.  THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL.

ATTACHED EXHIBITS.  The following Exhibits are attached to this Instrument:

X	Exhibit A	Description of the Land (required).
X	Exhibit B	Modifications to Instrument

IN WITNESS WHEREOF, Borrower has signed and delivered this Instrument or has caused this Instrument to be signed and delivered by its duly authorized representative.

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VMS NATIONAL PROPERTIES, an Illinois joint venture general partnership

By:  VMS National Residential Portfolio I, an Illinois limited partnership, its joint venture partner

By:  Maeril, Inc., a Delaware corporation, its general partner

By:   /s/Patti K. Fielding

Patti K. Fielding

Executive Vice President and Treasurer

By:  VMS National Residential Portfolio II, an Illinois limited partnership, its joint venture partner

By:  Maeril, Inc., a Delaware corporation, its general partner

By:   /s/Patti K. Fielding

Patti K. Fielding

Executive Vice President and Treasurer

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EXHIBIT A

[DESCRIPTION OF THE LAND]

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EXHIBIT B

Modifications to Security Instrument

The following modifications are made to the text of the Instrument that precedes this Exhibit:

1.

Paragraph 7 is amended to add the following subparagraph:

(f)

Notwithstanding the provisions of Subparagraph 7(a), Lender will not require Borrower to deposit with Lender amounts sufficient to accumulate with Lender the entire sum required to pay Taxes, provided that Borrower delivers to Lender a letter of credit and opinion of the letter of credit issuer’s counsel, both in form and content satisfactory to Lender in its sole discretion, in an amount equal to one (1) year’s Taxes.  In the event that Borrower does not timely pay Taxes or fails to provide Lender with proof of such payment, Lender shall have the right to (i) cash the letter of credit and apply the proceeds of the same to the payment of Taxes, (ii) deposit any proceeds in excess of the amount of Taxes then due and payable into Lender’s account for Imposition Deposits and (iii) require Borrower to deposit with Lender Imposition Deposits as provided in Subpar agraph 7(a).

2.

Paragraph 18(a) is amended to add the following sections:

(5)

the presence of any form of toxic mold or fungus in the Mortgaged Property of a type which may pose a significant risk to human health or the environment or would negatively impact the value of the Mortgaged Property (collectively “Mold”);

(6)

any activity, condition, event or omission that causes the growth of Mold on or in the Mortgaged Property.

3.

The defined term “Prohibited Activities or Conditions” is amended to include the matters described in Sections 18(a)(5) and 18(a)(6).

4.

A new Section 21(a)(8) is added as follows:

(8)

if, at any time, AIMCO REIT loses the authority or the ownership interests necessary to control, either directly or indirectly, Borrower and Guarantor and Borrower’s and Grantor’s Controlling Entities (“AIMCO Authorization”), Grantor covenants to send notice of such loss of AIMCO Authorization to Lender within fifteen (15) business days.  Such loss of AIMCO Authorization, shall be deemed a Transfer hereunder, and such Transfer shall constitute an Event of Default under Section 21(a) unless AIMCO REIT regains such AIMCO Authorization within sixty (60) days after the date of the loss.

5.

Section 33 is amended by adding the following sentences at the end of such Section:

“Borrower has disclosed to and provided Lender with information relating to assets it currently owns in addition to the Mortgaged Property (the “Disclosed Assets”).  Lender acknowledges that Borrower is not a single asset entity and agrees that Borrower may continue to own and operate the Disclosed Assets until September 30, 2007.  Until the Indebtedness is paid in full, Borrower (a) shall not acquire any real or personal property other than (i) the Mortgaged Property, (ii) the Disclosed Assets, (iii) personal property related to the operation and maintenance of the Mortgaged Property and the

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Disclosed Assets, and (iv) personal property and residences used primarily for the personal use of the Borrower and their family; (b) shall not operate any business other than the management and operation of the Mortgaged Property and the Disclosed Assets; (c) shall not maintain its assets in a way which is difficult to segregate and identify and (d) grant, create or permit the existence of any new or additional mortgage, deed of trust, deed to secure debt or other lien encumbrance on any of the Disclosed Assets, the Mortgaged Property or ownership interest in the Borrower, whether voluntary, involuntary or by operation of law.  In the event the Property shall be transferred, the single asset requirements of the original Section 33 of this Instrument shall apply for any transferee.”

6.

The following new Section is added at the end of the Instrument after the last numbered Section, but there are no Sections between the last numbered Section and Section 55:

“55.  CONVEYANCE.

No later than September 30, 2007, Borrower shall convey all of its interest in the Mortgaged Property (the “Conveyance”) to a Lender-approved, single-asset, single purpose entity.  Failure to complete the Conveyance shall constitute an event of default under Section 22 of the Security Instrument.

The documents evidencing the Conveyance shall be submitted to Lender for review prior to the Conveyance, and shall be in form and substance satisfactory to Lender.  Borrower agrees to pay all costs incurred in connection with the Conveyance; including, without limitation, the legal fees, if any, of Lender’s attorneys in connection with the required review and approval and the endorsement to the Lender’s title insurance policy.

Completion of the Conveyance shall be evidenced by submission to Lender of the recorded conveyance documents and an endorsement to the Lender’s title insurance policy.

It is understood that no transfer or application fee shall be due in connection with the Conveyance, and that the Conveyance shall not be deemed to violate Section 21 of the Security Instrument respecting Transfers.”

7.

AIMCO STANDARD.

A.

Section 1(v) is modified to read as follows:

(v)

"Personalty" means all furniture, furnishings, equipment, machinery, building materials, appliances, goods, supplies, tools, books, records (whether in written or electronic form), computer equipment (hardware and software) and other tangible personal property (other than Fixtures) which are used now or in the future exclusively in connection with the ownership, management or operation of the Land or the Improvements or are located on the Land or in the Improvements, and any operating agreements relating to the Land or the Improvements, and any surveys, plans and specifications and contracts for architectural, engineering and construction services relating to the Land or the Improvements and all other intangible property and rights exclusively relating to the operation of, or used exclusively in

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connection with, the Land or the Improvements including all governmental permits relating to any activities on the Land.

B.

Section 7(c) is modified to read as follows:

(c)

Notwithstanding the provisions of  Section 7(a), Lender will not require Borrower to deposit with Lender amounts sufficient to accumulate with Lender the entire sum required to pay the water and sewer charges, fire, hazard or other insurance premiums, and ground rents.  At least annually, Borrower must provide Lender with proof of payment of all such Impositions for which Lender is not collecting Imposition Deposits.  In the event that Borrower does not timely pay any of the Impositions, or fails to provide Lender with proof of such payment, or upon the occurrence of an Event of Default hereunder, or upon Borrower’s failure to maintain the Mortgaged Property in a satisfactory manner in accordance with the requirements of this Instrument, then in any such events, Lender may require Borrower to deposit with Lender the Imposition Deposits as provided in Section 7(a).

C.

Except in a case where Lender in its discretion determines that an emergency exists, Lender may take actions specified in Section 12(a) only if Lender has notified Borrower of Borrower's failure to perform any of its obligations under this Instrument or any other Loan Document and Borrower does not cure the failure within ten (10) days after such notice.  If Lender so determines that an emergency exists, Lender shall notify Borrower of the action taken within ten (10) days after the action is taken.

D.

Sections 14(b)(4) and 14(b)(5) are modified to read as follows:

(4)

within 120 days after the end of each fiscal year of Borrower, and at any other time upon Lender's request, a statement that identifies all owners of any interest in Borrower and each general partner in Borrower, and confirming that the ownership of each other Controlling Entity has not changed in a manner that violates Section 21(a);

(5)

promptly following Lender's request, quarterly or monthly income and expense statements for the Property relating to a quarterly or monthly period, as the case may be, ending no later than 45 days before the request;

E.

For purposes of Section 14(b), Borrower shall be deemed to have delivered any statement or document "upon Lender's request" if Borrower has delivered the document promptly following Lender's request.

F.

Notwithstanding Section (14)(c), unless an Event of Default has occurred and is continuing, or Lender has determined that an event having a Material Adverse Effect has occurred, Lender may require that the financial statements required by Sections 14(b)(1), 14(b)(2) and 14(b)(3) be audited, but may not require that any other financial statements required by Section 14 be audited.  Certification of a statement by the chief financial officer of the entity that is the subject of the statement or, in the case of a partnership, the chief

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financial officer of the general partner, will be acceptable to Lender as certification by an individual having authority to bind Borrower.

G.

Lender shall not have Borrower's books and records audited pursuant to Section 14(d) unless Lender has given Borrower notice specifying the statements, schedules and reports required by Section 14(b) that Borrower has failed to provide, and Borrower has not provided such statements by the expiration of ten days after such notice.

H.

So long as Borrower is contesting the amount and validity of any Imposition other than insurance premiums diligently and in good faith as described in Section 15(d) and all of the conditions specified in clauses (1) through (4) of Section 15(d) are satisfied, Lender will refrain from applying Imposition Deposits to payment of the contested Imposition.

I.

Section 15(e) and Section 16 are modified to read as follows:

15(e)

Borrower shall promptly deliver to Lender a copy of all notices of, and invoices for Impositions, and if Borrower pays any Imposition directly (which Borrower has no obligation to do unless Imposition Deposits have been waived or are insufficient and Lender has notified Borrower of that insufficiency), Borrower shall promptly furnish to Lender receipts evidencing such payments.

16.

LIENS; ENCUMBRANCES.  Borrower acknowledges that, to the extent provided in Section 21, the grant, creation or existence of any mortgage, deed of trust, deed to secure debt, security interest or other lien or encumbrance (a “Lien”) on the Mortgaged Property (other than the lien of this Instrument), or on certain ownership interests in Borrower, whether voluntary, involuntary or by operation of law, and whether or not such lien has priority over the lien of this Instrument, is a “Transfer” which constitutes an Event of Default.

J.

For purposes of Section 18(b), "pre-packaged supplies, cleaning materials and petroleum products customarily used in the operation and maintenance of comparable multifamily properties" shall include, without limitation, pool, spa, maintenance and gardening materials.

K.

The second sentence of Section 18(c) is modified to read as follows:

Borrower shall not lease or allow the sublease or use of all or any portion of the Mortgaged Property to any tenant or subtenant for nonresidential use by any user that, in the ordinary course of its business, would be reasonably expected to cause or permit any Prohibited Activity or Condition.

L.

For purposes of Section 18(d), Borrower shall only be obligated to pay out-of-pocket expenses incurred by Lender in connection with the monitoring and review of an O&M Program and Borrower's performance to the extent such expenses are reasonable.

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M.

Borrower's representation and warranty in Section 18(e)(4) regarding requirements for notification regarding releases of Hazardous Materials shall relate only to such releases, if any, at or affecting the Mortgaged Property.

N.

Section 18(e)(5) is modified to read as follows:

(5)

no event has occurred with respect to the Mortgaged Property that constitutes, or with the passing of time or the giving of notice would reasonably be expected to constitute, noncompliance with the terms of any Environmental Permit;

O.

Section 18(g) is modified to read as follows:

(g)

Borrower shall pay promptly the costs of any environmental inspections, tests or audits ("Environmental Inspections") required by Lender in connection with or in preparation for any foreclosure or deed in lieu of foreclosure.  Borrower shall also pay promptly the reasonable costs of any Environmental Inspections required by Lender in connection with, or as a condition of Lender's consent to any Transfer under Section 21, or required by Lender following a reasonable determination by Lender that Prohibited Activities or Conditions may exist.  Any such costs incurred by Lender (including the fees and out-of-pocket costs of attorneys and technical consultants whether incurred in connection with any judicial or administrative process or otherwise) which Borrower fails to pay promptly shall become an additional part of the Indebte dness as provided in Section 12. The results of all Environmental Inspections made by Lender in connection with or in preparation for any foreclosure or deed in lieu of foreclosure shall at all times remain the property of Lender and Lender shall have no obligation to disclose such results to or otherwise make such results available to Borrower or any other party.  Lender will make available to Borrower the results of all other Environmental Inspections made by Lender.  Lender hereby reserves the right, and Borrower hereby expressly authorizes Lender, to make available to any party, including any prospective bidder at a foreclosure sale of the Mortgaged Property, the results of any Environmental Inspections made by Lender with respect to the Mortgaged Property.  Borrower consents to Lender notifying any party (either as part of a notice of sale or otherwise) of the results of any of Lender's Environmental Inspections.  Except in the case of an Environmental Inspection performed in connect ion with a foreclosure or deed in lieu of foreclosure, or a disclosure of Environmental Inspection results that Lender is required by law to make, Lender shall notify Borrower of its intention to disclose such information and shall give Borrower ten days to provide supplemental information, explanations or corrections to accompany the disclosure. Borrower acknowledges that Lender cannot control or otherwise assure the truthfulness or accuracy of the results of any of its Environmental Inspections and that the release of such results to prospective bidders at a foreclosure sale of the Mortgaged Property may have a material and adverse effect upon the amount which a party may bid at such sale.  Borrower

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agrees that Lender shall have no liability whatsoever as a result of delivering the results of any of its Environmental Inspections to any third party, and Borrower hereby releases and forever discharges Lender from any and all claims, damages, or causes of action, arising, out of, connected with or incidental to the results of, the delivery of any of Lender's Environmental Inspections.

P.

Lender shall not commence Remedial Work under the second sentence of Section 18(h) unless Lender has given Borrower notice of its intention to do so and Borrower has not begun performing the Remedial Work within 10 days after such notice.

Q.

The following sentence is added at the end of Section 18(j):

However, Borrower shall have no obligation to indemnify any of the foregoing parties to the extent that the proceedings, claims, damages, penalties or costs arise out of the gross negligence or willful misconduct of Lender, any prior owner or holder of the Note, the Loan Servicer or any prior Loan Servicer.

R.

For purposes of Section 19(b), Lender will accept a duplicate original of any insurance policy.

S.

For purposes of Section 19(d), an insurance company will be acceptable to Lender if it has a rating in Best's Key Rating Guide of at least "A-" and a financial size category of at least “v,” provided that if Fannie Mae changes its requirements for the financial rating of insurers generally, Lender may change the requirement set forth in this sentence in a manner consistent with any such change.

T.

Clause (2) of Section 19(g) is modified to read as follows:

(2)

Lender determines, in its discretion, that the combination of insurance proceeds and amounts provided by the Borrower will be sufficient to complete the Restoration.

U.

For purposes of Section 19(h), Lender shall automatically succeed to rights of Borrower in and to insurance policies and unearned premiums only to the extent permitted by the applicable policies and insurance companies.

V.

Section 21(a)(2) is modified to read as follows:

(2)

if Borrower is a joint venture general partnership, a Transfer of (A) any general partnership interest (except for a Transfer to a Qualified REIT Subsidiary, as defined in Section 856(i)(2) of the Internal Revenue Code of 1986, 100% owned by Apartment Investment and Management Company, a Maryland corporation or to a Qualified REIT Subsidiary, as defined in Section 856 (l)(1) of the Internal Revenue Code of 1986, 100% owned by AIMCO OP), or (B) other interests in Borrower that would cause the Initial Owners of Borrower to own less than 51% of all partnership interests in Borrower;

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W.

New Sections 21(b)(7), 21(b)(8), 21(b)(9), and 21(b)(10) are added, as follows:

(7)

The Transfer of any joint venture partnership interests in Borrower provided no Change of Control occurs as a result of such Transfer.

(8)

The Transfer of shares of common stock, limited partnership interests or other beneficial or ownership interests or other forms of securities in AIMCO REIT or AIMCO OP, and the issuance of all varieties of convertible debt, equity and other similar securities of AIMCO REIT or AIMCO OP, and the subsequent Transfer of such securities; provided, however, that no Change of Control occurs as a result of such Transfer, either upon such Transfer or upon the subsequent conversion to equity of such convertible debt or other securities.

(9)

The issuance by AIMCO REIT or AIMCO OP of additional common stock, limited partnership interests or other beneficial or ownership interests, convertible debt, equity and other similar securities, and the subsequent Transfer of such convertible debt or securities; provided, however, that no Change of Control occurs as the result of such Transfer, either upon such Transfer or upon the subsequent conversion to equity of such convertible debt or other securities.

(10)

So long as AIMCO REIT owns 100% of the stock of AIMCO-LP, Inc., a Transfer of limited partnership interests that results in AIMCO-LP, Inc. owning not less than 50.1% of the limited partnership interests in AIMCO OP.

X.

Section 21(b)(8) shall apply only to a Transfer of an interest in a Controlling Entity that is prohibited by Section 21(a)(7).

Y.

A new Section 21(d) is added, as follows:

(d)

For purposes of this Section 21, the following terms shall be defined as follows:

(1)

"Change of Control" shall mean the earliest to occur of (A) the date an Acquiring Person becomes (by acquisition, consolidation, merger or otherwise), directly or indirectly, the beneficial owner of more than forty percent (40%) of the total Voting Equity Capital of AIMCO REIT then outstanding, or (B) the date on which AIMCO REIT shall cease to hold (whether directly or indirectly through a wholly owned intermediary entity such as AIMCO-LP, Inc. or AIMCO-GP, Inc.) at least 50.1% of the limited partnership interests in AIMCO OP, or (C) the date on which AIMCO REIT shall cease for any reason to hold (whether directly or indirectly) (i) the

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interests in the Joint Venture Partners held as of the date of this Instrument (as evidenced by organizational charts and documents submitted to Lender as of such date) and (ii) the Controlling Interest(s) in the Borrower, or (D) the replacement (other than solely by reason of retirement at age sixty-five or older, death or disability) of more than 50% (or such lesser percentage as is required for decisionmaking by the board of directors of trustees, if applicable) of the members of the board of directors (or trustee, if applicable) of AIMCO REIT over a one-year period where such replacement shall not have been approved by a vote of at least a majority of the board of directors (or trustees, if applicable) of AIMCO REIT then still in office who either were members of such board of directors (or trustees, if applicable) a t the beginning of such one year period or whose election as members of the board of directors (or trustees, if applicable) was previously so approved.

(2)

"Acquiring Person" shall mean a "person" or group of "persons" within the meaning of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended.  However, notwithstanding the foregoing, “Acquiring Person” shall not be deemed to include any member of the Borrower Control Group unless such member has, directly or indirectly, disposed of, sold or otherwise transferred to, or encumbered or restricted (whether by means of voting trust agreement or otherwise) for the benefit of an Acquiring Person, all or any portion of the Voting Equity Capital of AIMCO REIT directly or indirectly owned or controlled by such member or such member directly or indirectly votes all or any portion of the Voting Equity Capital of AIMCO REIT, directly or indirectly, owned or controlled by such member for the taking of any action which, direc tly or indirectly constitutes or would result in a Change of Control, in which event such member of the Borrower Control Group shall be deemed to constitute an Acquiring Person to the extent of the Voting Equity Capital of AIMCO REIT owned or controlled by such member.

(3)

"Borrower Control Group" shall mean Terry Considine, Peter K. Kompaniez, Richard S. Ellwood, J. Landis Martin, Thomas L. Rhodes and James N. Bailey.

(4)

A "Person" shall mean an individual, an estate, a trust, a corporation, a partnership, a limited liability company or any other organization or entity (whether governmental or private).

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(5)

"Security" shall have the same meaning as in Section 2(1) of the Securities Act of 1933, as amended.

(6)

"Controlling Interest(s)" shall mean (i) with respect to a partnership, such majority and/or managing general partner interests which, together with a majority of limited partnership interests if necessary for consent purposes, vest in the holder of such interests the sole power, right and authority to control the day to day operations of the Borrower; including, without limitation, the authority to manage, operate and finance the Mortgaged Property, (ii) with respect to a corporation, the number of shares which entitle the holder to elect a majority of the board of directors of the Borrower, and (iii) with respect to a limited liability company, such majority and/or managing member interests as vest in the holder of such interests the sole power, right and authority to control the day to day operations of the Borrower; including, without limitation, the authority to manage, operate and finance the Mortgaged Property.

(7)

"AIMCO REIT" shall mean Apartment Investment and Management Company, a corporation organized and existing under the laws of the State of Maryland.

(8)

"AIMCO OP" shall mean AIMCO Properties, L.P., a limited partnership organized and existing under the laws of the State of Delaware.

(9)

"Joint Venture Partners" shall mean the entities executing this Instrument on behalf of the Borrower and/or its successors or assigns in interest.

(10)

“Voting Equity Capital” shall mean Securities of any class or classes, the holders of which are ordinarily, in the absence of contingencies, entitled to elect a majority of the board of directors (or Persons performing similar functions).

V.

Section 22(a) is modified to read as follows:

(a)

any failure by Borrower to pay or deposit (i) any Imposition Deposit within three days after it is due, or (ii) any other amount required by the Note, this Instrument, or any other Loan Document when due.

W.

Section 28 shall obligate Borrower to provide such further assurances as Lender reasonably may require.

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X.

The words "Except as otherwise disclosed to Lender in writing, before the date of this Instrument" are added at the beginning of the second sentence of Section 41.

Y.

Section 37 is modified by adding: “; provided, however, that in the event of a Transfer, any or some or all of the Modifications to Instrument set forth in Exhibit B (if any) may be modified or rendered void by Lender at Lender’s option by notice to Borrower/transferee”.  The modifications set forth in this Exhibit B shall be null and void unless title to the Mortgaged Property is vested in an entity whose Controlling Interest(s) are directly or indirectly held by AIMCO REIT or AIMCO OP.

INITIALS

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EX-10

EXHIBIT 10.53

Shadow Wood Apartments

MULTIFAMILY NOTE

(VARIABLE LOAN)

US $3,900,682.00

As of January 18, 2007

FOR VALUE RECEIVED, the undersigned (“Borrower”) promises to pay to the order of CAPMARK FINANCE INC., a California corporation, the principal sum of Three Million Nine Hundred Thousand Six Hundred Eighty-Two and 00/100 Dollars (US $3,900,682.00), with interest on each Variable Loan at an annual rate as calculated in Section 3 hereof.

This Note is executed and delivered by Borrower pursuant to one of either (i) that certain Amended and Restated Loan Agreement, dated as of September 16, 2002, by and among certain borrowers signatory thereto and Lender or (ii) that certain Loan Agreement dated as of November 1, 2002, by and among certain borrowers signatory thereto and Lender.  As used herein, the term “Loan Agreement” shall mean whichever of the loan agreements described in the preceding sentence shall apply from time to time in accordance with their respective terms, along with all amendments, supplements, replacements, restatements or other modifications thereto or thereof from time to time made.  The Loan Agreement shall evidence the obligation of Borrower to repay a Variable Loan made by Lender to Borrower in accordance with the terms of the Loan Agreement.  This Note is entitled to the benef it and security of the Loan Documents provided for in the Loan Agreement, to which reference is hereby made for a statement of all of the terms and conditions under which the Variable Loan evidenced hereby is made.  The Loan Agreement requires certain of the terms of each Variable Loan to be evidenced by one or a series of Loan Confirmation Instruments, and reference is hereby made to each such Loan Confirmation Instrument for such terms.

1.

Defined Terms.  As used in this Note, (i) the term “Lender” means the holder of this Note, and (ii) the term “Indebtedness” means the principal of, interest on, or any other amounts due at any time under, this Note, the Security Instrument or any other Loan Document, including prepayment premiums, late charges, default interest, and advances to protect the security of the Security Instrument under Section 12 of the Security Instrument.  Event of Default and other capitalized terms used but not defined in this Note shall have the meanings given to such terms in the Loan Agreement or, if not defined in the Loan Agreement, as defined in the Security Instrument (as defined in Paragraph 5).

2.

Address for Payment.  All payments due under this Note shall be payable at Capmark Finance Inc., 116 Welsh Road, Horsham, PA  19044 , Attention:  Servicing – Account Manager, or such other place as may be designated by written notice to Borrower from or on behalf of Lender.

3.

Payment of Principal and Interest.  Principal and interest shall be paid as follows:

(a)

This Note shall evidence a Variable Loan made from time to time under the Loan Agreement.  The Variable Loan shall bear interest at a rate determined in accordance with Section 2.01 of the Loan Agreement.

(b)

Borrower shall pay imputed interest on each Variable Loan in advance in the form of a Discount in accordance with Section 1.04(b) of the Loan Agreement (except that Borrower

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shall pay actual interest on the Variable Loan for the partial month period, if any, in accordance with Section 1.04(a) of the Loan Agreement).  

(c)

Borrower shall make monthly payments of principal each in the amount as set forth on the attached Amortization Schedule.  Lender shall apply each such principal payment to the outstanding principal amount of the Loan on the Rollover Date next following receipt of any such payment.  If not sooner paid, the entire principal amount of the Variable Loan shall be due and payable on the earlier of (i) the termination of the Loan Agreement pursuant to subsection (e) of Section 1.02 thereof, (ii) the fifth anniversary (unless such date is extended pursuant to Section 1.07 of the Loan Agreement, in which case, the tenth anniversary) of the Initial Closing Date or (iii) the maturity date of any outstanding MBS, unless either (A) not less than five Business Days prior to the maturity date of the outstanding MBS, a Borrower has requested that the outstanding MBS be renewed wi th a new MBS or converted to a Fixed Loan to take effect on the maturity date of the outstanding MBS and such new MBS has been issued or conversion has occurred or (B) the MBS is automatically renewed, which automatic renewal shall occur in the event that a Borrower does not make the request set forth in subpart (iii)(A) above and does not give Lender notice not less than five Business days prior to the maturity date of the outstanding MBS that the Variable Loan related to such outstanding MBS shall be paid on the maturity date of such outstanding MBS (the “Maturity Date”).  Any MBS that is issued as a result of an automatic renewal of a maturing MBS as contemplated by subpart (iii)(B) above shall have a maturity date of three (3) months after the MBS Issue Date.  

(d)

In addition to payment of principal and the Discount, Borrower shall pay the Variable Loan Fee due on each Variable Loan in accordance with Section 1.04(b)(ii) of the Loan Agreement.

4.

Application of Payments.  If at any time Lender receives, from Borrower or otherwise, any amount applicable to the Indebtedness that is less than all amounts due and payable at such time, Lender may apply that payment to amounts then due and payable in any manner and in any order determined by Lender, in Lender’s discretion.  Borrower agrees that neither Lender’s acceptance of a payment from Borrower in an amount that is less than all amounts then due and payable nor Lender’s application of such payment shall constitute or be deemed to constitute either a waiver of the unpaid amounts or an accord and satisfaction.

5.

Security.  The Indebtedness is secured, among other things, by a multifamily mortgage, deed to secure debt or deed of trust dated as of the date of this Note (the “Security Instrument”) and reference is made to the Security Instrument for other rights of Lender concerning the collateral for the Indebtedness.

6.

Acceleration.  If an Event of Default has occurred and is continuing, the entire unpaid principal balance, any accrued interest, the prepayment premium payable under Paragraph 10, if any, and all other amounts payable under this Note and any other Loan Document shall at once become due and payable, at the option of Lender, without any additional notice to Borrower.  Lender may exercise this option to accelerate regardless of any prior forbearance.

7.

Late Charge.  If any monthly amount payable under this Note or under the Security Instrument or any other Loan Document is not received by Lender within 10 days after the amount is due, Borrower shall pay to Lender, immediately and without demand by Lender, a late charge equal to 5 percent of such amount.  Borrower acknowledges that its failure to make timely payments will cause Lender to incur additional expenses in servicing and processing the loan evidenced by this Note (the “Loan”), and that it is extremely difficult and impractical to determine those additional expenses.  Borrower agrees that the late charge payable pursuant to this Paragraph represents a fair and reasonable estimate, taking into account all circumstances existing on the date of this Note, of the additional expenses Lender will incur by reason of such

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late payment.  The late charge is payable in addition to, and not in lieu of, any interest payable at the Default Rate pursuant to Paragraph 8.

8.

Default Rate.  So long as any monthly installment or any other payment due under this Note remains past due for 30 days or more, interest under this Note shall accrue on the unpaid principal balance from the earlier of the due date of the first unpaid monthly installment or other payment due, as applicable, at a rate (the “Default Rate”) equal to the lesser of 4 percentage points above the rate stated in the first paragraph of this Note or the maximum interest rate which may be collected from Borrower under applicable law.  If the unpaid principal balance and all accrued interest are not paid in full on the Maturity Date, the unpaid principal balance and all accrued interest shall bear interest from the Maturity Date at the Default Rate.  Borrower also acknowledges that its failure to make timely payments will cause Lender to incur additional expenses in s ervicing and processing the Loan, that, during the time that any monthly installment or payment under this Note is delinquent for more than 30 days, Lender will incur additional costs and expenses arising from its loss of the use of the money due and from the adverse impact on Lender’s ability to meet its other obligations and to take advantage of other investment opportunities, and that it is extremely difficult and impractical to determine those additional costs and expenses.  Borrower also acknowledges that, during the time that any monthly installment or payment due under this Note is delinquent for more than 30 days, Lender’s risk of nonpayment of this Note will be materially increased and Lender is entitled to be compensated for such increased risk.  Borrower agrees that the increase in the rate of interest payable under this Note to the Default Rate represents a fair and reasonable estimate, taking into account all circumstances existing on the date of this Note, of the additional costs and expenses Lender will incur by reason of Borrower’s delinquent payment and the additional compensation Lender is entitled to receive for the increased risks of nonpayment associated with a delinquent loan.

9.

Limits on Personal Liability.

(a)

Except as otherwise provided in this Paragraph 9, Borrower shall have no personal liability under this Note, the Security Instrument or any other Loan Document for the repayment of the Indebtedness or for the performance of any other obligations of Borrower under the Loan Documents, and Lender’s only recourse for the satisfaction of the Indebtedness and the performance of such obligations shall be Lender’s exercise of its rights and remedies with respect to the Mortgaged Property and any other collateral held by Lender as security for the Indebtedness.  This limitation on Borrower’s liability shall not limit or impair Lender’s enforcement of its rights against any guarantor of the Indebtedness or any guarantor of any obligations of Borrower.

(b)

Borrower shall be personally liable to Lender for the repayment of a portion of the Indebtedness equal to any loss or damage suffered by Lender as a result of (1) failure of Borrower to pay to Lender upon demand after an Event of Default, all Rents to which Lender is entitled under Section 3(a) of the Security Instrument and the amount of all security deposits collected by Borrower from tenants then in residence; (2) failure of Borrower to apply all insurance proceeds and condemnation proceeds as required by the Security Instrument; (3) failure of Borrower to comply with Section 14(d) or (e) of the Security Instrument relating to the delivery of books and records, statements, schedules and reports; (4)  fraud or written material misrepresentation by Borrower or any officer, director, partner, member or employee of Borrower in connection with the application for or creation of the Indebtedn ess or any request for any action or consent by Lender; or (5) failure to apply Rents, first, to the payment of reasonable operating expenses (other than Property management fees that are not currently payable pursuant to the terms of an Assignment of Management Agreement or any other agreement with Lender executed in connection with the Loan) and then to amounts  (“Debt Service Amounts”) payable under this Note, the Security Instrument or any other Loan Document (except that Borrower will not be personally liable (i) to the extent that Borrower

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lacks the legal right to direct the disbursement of such sums because of a bankruptcy, receivership or similar judicial proceeding, or (ii) with respect to Rents that are distributed in any calendar year if Borrower has paid all operating expenses and Debt Service Amounts for that calendar year).

(c)

Borrower shall become personally liable to Lender for the repayment of all of the Indebtedness upon the occurrence of any of the following Events of Default: (1) Borrower’s acquisition of any property or operation of any business not permitted by Section 33 of the Security Instrument; or (2) a Transfer that is an Event of Default under Section 21 of the Security Instrument.

(d)

To the extent that Borrower has personal liability under this Paragraph 9, Lender may exercise its rights against Borrower personally without regard to whether Lender has exercised any rights against the Mortgaged Property or any other security, or pursued any rights against any guarantor, or pursued any other rights available to Lender under this Note, the Security Instrument, any other Loan Document or applicable law. For purposes of this Paragraph 9, the term “Mortgaged Property” shall not include any funds that (1) have been applied by Borrower as required or permitted by the Security Instrument prior to the occurrence of an Event of Default, or (2) Borrower was unable to apply as required or permitted by the Security Instrument because of a bankruptcy, receivership, or similar judicial proceeding.

10.

Voluntary and Involuntary Prepayments.  Pursuant to the terms of the Loan Agreement, Borrower shall pay the entire amount of the Discount on any Variable Loan in advance.  Accordingly, any Variable Loan may be prepaid in whole or in part and at any time without penalty.  Borrower shall give Lender six (6) Business Days advance notice of any prepayment.

11.

Costs and Expenses.  Borrower shall pay on demand all reasonable expenses and costs, including reasonable fees and out-of-pocket expenses of attorneys and expert witnesses and costs of investigation, incurred by Lender as a result of any default under this Note or in connection with efforts to collect any amount due under this Note, or to enforce the provisions of any of the other Loan Documents, including those incurred in post-judgment collection efforts and in any bankruptcy proceeding (including any action for relief from the automatic stay of any bankruptcy proceeding) or judicial or non-judicial foreclosure proceeding.

12.

Forbearance.  Any forbearance by Lender in exercising any right or remedy under this Note, the Security Instrument, or any other Loan Document or otherwise afforded by applicable law, shall not be a waiver of or preclude the exercise of that or any other right or remedy.  The acceptance by Lender of any payment after the due date of such payment, or in an amount which is less than the required payment, shall not be a waiver of Lender’s right to require prompt payment when due of all other payments or to exercise any right or remedy with respect to any failure to make prompt payment.  Enforcement by Lender of any security for Borrower’s obligations under this Note shall not constitute an election by Lender of remedies so as to preclude the exercise of any other right or remedy available to Lender.

13.

Waivers.  Except as expressly provided in the Loan Agreement, presentment, demand, notice of dishonor, protest, notice of acceleration, notice of intent to demand or accelerate payment or maturity, presentment for payment, notice of nonpayment, grace, and diligence in collecting the Indebtedness are waived by Borrower and all endorsers and guarantors of this Note and all other third party obligors.

14.

Loan Charges.  If any applicable law limiting the amount of interest or other charges permitted to be collected from Borrower in connection with the Loan is interpreted so that any interest or other charge provided for in any Loan Document, whether considered separately or together with other charges provided for in any other Loan Document, violates that

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law, and Borrower is entitled to the benefit of that law, that interest or charge is hereby reduced to the extent necessary to eliminate that violation.  Borrower agrees to an effective rate of interest that is the stated rate of interest plus any additional rate of interest resulting from any other charges or fees that are to be paid by Borrower to Lender that may be found by a court of competent jurisdiction to be interest.  The amounts, if any, previously paid to Lender in excess of the permitted amounts shall be applied by Lender to reduce the unpaid principal balance of this Note.  For the purpose of determining whether any applicable law limiting the amount of interest or other charges permitted to be collected from Borrower has been violated, all Indebtedness that constitutes interest, as well as all other charges made in connection with the Indeb tedness that constitute interest, shall be deemed to be allocated and spread ratably over the stated term of the Note.  Unless otherwise required by applicable law, such allocation and spreading shall be effected in such a manner that the rate of interest so computed is uniform throughout the stated term of the Note.

15.

Commercial Purpose.  Borrower represents that the Indebtedness is being incurred by Borrower solely for the purpose of carrying on a business or commercial enterprise, and not for personal, family or household purposes.

16.

Counting of Days.  Except where otherwise specifically provided, any reference in this Note to a period of “days” means calendar days, not Business Days.

17.

Governing Law; Consent to Jurisdiction; WAIVER OF JURY TRIAL.  The provisions of Section 11.07 of the Loan Agreement (entitled “Choice of Law; Consent to Jurisdiction; Waiver of Jury Trial”) are hereby incorporated into this Note by this reference to the fullest extent as if the text of such Section were set forth in its entirety herein.

18.

Captions.  The captions of the paragraphs of this Note are for convenience only and shall be disregarded in construing this Note.

19.

Notices.  All notices, demands and other communications required or permitted to be given by Lender to Borrower pursuant to this Note shall be given in accordance with Section 11.09 of the Loan Agreement.

20.

Security for this Note.  Reference is made hereby to the Loan Agreement and the Security Documents for additional rights and remedies of Lender relating to the indebtedness evidenced by this Note.  Each Security Document shall be released in accordance with the provisions of the Security Documents.

21.

Loan May Not Be Reborrowed.  Borrower may not re-borrow any amounts under this Note which it has previously borrowed and repaid under this Note.

22.

Default Under Loan Agreement and Other Loan Documents.  The occurrence of an Event of Default under the Loan Agreement or the Security Instrument shall constitute an “Event of Default” under this Note in accordance with the Loan Agreement and the Security Instrument.  Upon the occurrence of an Event of Default under the Loan Agreement or the Security Instrument, the entire principal amount outstanding hereunder and accrued interest thereon shall at once become due and payable, at the option of the holder hereof.

23.

Loan Confirmation Instruments; Accounting for Variable Loans.  The terms of the Loan Agreement and this Note govern the repayment, and all other terms relating to the Variable Loan.  However, Borrower shall execute a Loan Confirmation Instrument to create a physical instrument evidencing each MBS issued to fund the Variable Loan.  The Loan Confirmation Instrument executed by Borrower in accordance with Section 2.02 of the Loan Agreement shall set forth the amount, term, Discount, Closing Date and certain other terms of each MBS issued to fund the Variable Loan.  The Loan Confirmation Instrument shall

-5-

conclusively establish each of the terms described in the preceding sentence, absent manifest error.  The MBS evidenced by the Loan Confirmation Instrument does not represent a separate indebtedness from that evidenced by this Note.   In making proof of this Note, no other documents other than this Note shall be required.  In making proof of the amount and terms of the outstanding Variable Loans under this Note, this Note, the related Loan Confirmation Instruments, and Lender’s records concerning payments made by Borrower under this Note, shall be conclusive evidence of the terms and outstanding amounts of the Variable Loan, absent manifest error.

24.

Modifications to Note.  There are standard modifications to this Note that are attached as Exhibit B-1 and Exhibit B-2 hereto.  In addition, there may be special modifications to this Note attached as Exhibit B-3 hereto.  All such exhibits are hereby incorporated into this Note as a part hereof.

IN WITNESS WHEREOF, Borrower has signed and delivered this Note under seal or has caused this Note to be signed and delivered under seal by its duly authorized representative.  Borrower intends that this Note shall be deemed to be signed and delivered as a sealed instrument.

[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]

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VMS NATIONAL PROPERTIES, an Illinois joint venture general partnership

By:  VMS National Residential Portfolio I, an Illinois limited partnership, its joint venture partner

By:  Maeril, Inc., a Delaware corporation, its general partner

By: /s/Patti K. Fielding

Patti K. Fielding

Executive Vice President and Treasurer

By:  VMS National Residential Portfolio II, an Illinois limited partnership, its joint venture partner

By:  Maeril, Inc., a Delaware corporation, its general partner

By: /s/Patti K. Fielding

Patti K. Fielding

Executive Vice President and Treasurer

-7-

PAY TO THE ORDER OF FANNIE MAE, WITHOUT RECOURSE.

CAPMARK FINANCE INC., a California corporation

By:/s/Max W. Foore

Max W. Foore

Vice President

-8-

EXHIBIT B-1

GMACCM LOAN AGREEMENT MODIFICATIONS

During any time that the terms, covenants and provisions of that certain Loan Agreement dated as of November 1, 2002 and more particularly described in the second paragraph on page 1 of the Note apply to the Variable Loan evidenced by the Note, paragraphs 3 and 23 of the Note are amended and replaced with the following substitute paragraphs 3 and 23:

“3.

Payment of Principal and Interest.  Principal and interest shall be paid as follows:

(a)

This Note shall evidence a Variable Loan made from time to time under the Loan Agreement.  Borrower shall not be required to make monthly principal payments prior to the Fannie Mae Addition Date, but shall make monthly payments of principal after the Fannie Mae Reassignment Date, if it occurs, as set forth in Section 1.04(d) of the Loan Agreement.

(b)

Borrower shall pay actual interest on the Variable Loan during the period described in accordance with Section 1.04(a) of the Loan Agreement.  Borrower shall pay interest on its Variable Rate Loan in arrears at a rate equal to LIBOR Rate plus a number of basis points determined in accordance with Section 2.01 of the Loan Agreement.  For purposes of the previous sentence, the LIBOR Rate shall be reset every ninety (90) days commencing on the date that is ninety (90) days after the Initial Closing Date.  On the date the Variable Loan is funded, Borrower shall pay interest in advance from the date of funding through January 31, 2007.  On March 1, 2007 and on the first (1st) day of each calendar month thereafter, Borrower shall pay interest in arrears calculated for the actual number of days since the first (1st) day of the previous calendar month.

(c)

If not sooner paid, the entire principal amount of the Variable Loan shall be due and payable in accordance with Section 1.02 of the Loan Agreement.  

(d)

Borrower shall not pay any Discount.

23.

Loan Confirmation Instruments; Accounting for Variable Loans.  The terms of the Loan Agreement and this Note govern the repayment, and all other terms relating to the Variable Loan.  However, Borrower shall execute one or a series of Loan Confirmation Instruments to create a physical instrument evidencing the terms of the Variable Loan.  The Loan Confirmation Instrument or series of Loan Confirmation Instruments executed by Borrower in accordance with Section 2.02 of the Loan Agreement shall set forth the amount, term, the interest rate spread over the LIBOR Rate Closing Date and certain other terms related to the funding the Variable Loan.  The Loan Confirmation Instrument shall conclusively establish each of the terms described in the preceding sentence, absent manifest error.  The variable terms evidenced by the Loan Confirmation Instrument do not represe nt a separate indebtedness from that evidenced by this Note.   In making proof of this Note, no other documents other than this Note shall be required.  In making proof of the amount and terms of the outstanding Variable Loans under this Note, this Note, the related Loan Confirmation Instruments, and Lender’s records concerning payments made by Borrower under this Note, shall be conclusive evidence of the terms and outstanding amounts of the Variable Loan, absent manifest error.”

During any time that the terms, covenants and provisions of that certain Amended and Restated Loan Agreement dated as of September 16, 2002 and more particularly described in the second paragraph on page 1 of the Note apply to the Variable Loan evidenced by the Note, this Exhibit B-1 shall not apply and paragraphs 3 and 23 of the Note shall not be amended or replaced with the provisions set forth in this Exhibit B-1.

B-1

EXHIBIT B-2

AIMCO MODIFICATIONS

The following modifications are made to the text of the Note that precedes this Exhibit:

1.

Section 9(b)(4) is modified by deleting “or” at the end thereof.

2.

Section 9(b)(5) is modified to read as follows:

“(5) failure to apply Rents, first, to the payment of reasonable operating expenses (other than Property management fees that are not currently payable pursuant to the terms of an Assignment of Management Agreement or any other agreement with Lender executed in connection with the Loan) and then to amounts (“Debt Service Amounts”) payable under this Note, the Security Instrument or any other Loan Document (except that Borrower will not be personally liable (i) to the extent that Borrower lacks the legal right to direct the disbursement of such sums because of a bankruptcy, receivership or similar judicial proceeding, or (ii) with respect to Rents that are distributed in any calendar quarter if Borrower has paid all operating expenses and Debt Service Amounts for such calendar quarter to date); or”

3.

A new Section 9(b)(6) is added following Section 9(b)(5), stating as follows:

“(6) failure to pay when due any water and sewer charges, fire, hazard or other insurance premiums and ground rents owing from time to time in connection with the Mortgaged Property.”

B-2

EX-10

EXHIBIT 10.54

Shadow Wood Apartments

GUARANTY

This Guaranty (the “Guaranty”) is made and entered into as of the 18^th day of January, 2007 by AIMCO PROPERTIES, L.P., a Delaware limited partnership (the “Guarantor”), for the benefit of CAPMARK FINANCE INC., a California corporation (“Lender”).

RECITALS

A.

Lender has agreed to execute both (i) that certain Amended and Restated Loan Agreement, dated as of September 16, 2002, by and among AIMCO Properties, L.P., a Delaware limited partnership, certain borrowers signatory thereto and Lender and (ii) that certain Loan Agreement dated as of November 1, 2002, by and among certain borrowers signatory thereto and Lender (as amended, supplemental or otherwise modified or amended and restated from time to time, the “Loan Agreement”),  pursuant to which, inter alia, Lender has agreed, subject to the terms, conditions and limitations of the Loan Agreement, to make a loan to VMS National Properties, an Illinois joint venture general partnership (the “Borrower”) from time to time loan to be evidenced by the Note (the “Loan”).  Terms used herein not defined herein have the definition given them in the Loan Agreement.

B.

The repayment of the Loan and all of the Obligations of the Borrower under the Loan Agreement or the other Loan Documents are guaranteed by this Guaranty to the extent of Borrower’s personal liability as provided in Section 9 of the Note evidencing the Loan, and except for such obligations described herein, Guarantor shall have no liability in connection with, or responsibility to perform, under or in accordance with the Loan Agreement or other Loan Documents.

C.

Guarantor owns, directly or indirectly, an ownership interest in the Borrower and will receive a direct and material benefit from the Loans to the Borrower.

D.

Lender is willing to make the Loan to the Borrower only if Guarantor agrees to enter into this Guaranty.

NOW, THEREFORE, in order to induce Lender to make the Loan to Borrower, and in consideration thereof, Guarantor hereby agrees as follows:

Section 1.

Definitions.  All capitalized terms used but not defined in this Guaranty shall have the meanings ascribed to such terms in the Loan Agreement.  The following terms shall have the meaning set forth below for purposes of this Guaranty:

“Material Adverse Effect” means, with respect to any circumstance, act, condition or event of whatever nature (including any adverse determination in any litigation, arbitration, or governmental investigation or proceeding), whether singly or in conjunction with any other event or events, act or acts, condition or conditions, or circumstance or circumstances, whether or not related, a material adverse change in or a materially adverse effect upon the present or future ability of the Guarantor, to the extent specifically referred to in the applicable provision of that Guaranty, to perform the Guaranteed Obligations.

“Net Worth” means, as of any date of determination and without double counting any item, the sum of the capital stock or other capital equity interests and additional paid-in capital

1

plus retained earnings (or minus accumulated deficits) of the Guarantor, the REIT and their respective Subsidiaries on a consolidated basis determined in conformity with GAAP.

“REIT” means Apartment Investment and Management Company, a Maryland corporation.

“Subsidiary” means, with respect to the REIT, the Guarantor or an Affiliate of either of them, a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise controlled, directly or indirectly, through one or more intermediaries, or both, by the REIT, the Guarantor or an Affiliate of either of them.

Section 2.

Guaranty of Payment.  Guarantor irrevocably, absolutely and unconditionally guarantees to Lender all of the following (collectively, the “Guaranteed Obligations”):  the due and punctual payment when due, whether at maturity or earlier, by reason of acceleration or otherwise, at all times, of all amounts for which Borrower is personally liable under Section 9 of the Note.

This Guaranty shall be an unconditional guaranty of payment and performance and not of collection, and is in no way conditioned upon any attempt by Lender to pursue or exhaust any remedy against Borrower.  This Guaranty is a continuing guaranty which shall remain in full force and effect until all of the Guaranteed Obligations have been paid and performed in full; and Guarantor shall not be released from any obligations to Lender under this Guaranty as long as any amount payable by the Borrower to Lender, or any obligation by the Borrower, under the Loan Documents is not performed, satisfied, settled or paid in full.

Section 3.

Form of Payment.  All payments under this Guaranty shall be made to Lender in immediately available funds, without reduction by any recoupment, set-off, counterclaim or cross-claim against Lender.

Section 4.

Guarantor’s Obligations are Absolute.  The obligations of Guarantor under this Guaranty shall be absolute and unconditional, shall not be subject to any counterclaim, set-off, recoupment, deduction, or defense based upon any claim Guarantor may have against Lender or Borrower and shall remain in full force and effect without regard to, and shall not be released, discharged or terminated or in any other way affected by, any circumstance or condition (whether or not Guarantor shall have any knowledge or notice thereof), including, without limitation:

(a)

any amendment or modification of, or extension of time for payment of any of the principal of, interest on or other amounts payable under the Loan Documents;

(b)

any exercise or non-exercise by Lender of any right, power or remedy under or in respect of the Loan Documents, or any waiver, consent, forbearance, indulgence or other action, inaction or omission by Lender under or in respect of the Loan Documents;

(c)

any assignment, sale or other transfer of Borrower’s interest in all or any part of the real or personal property which at any time constitutes collateral for the payment of the Guaranteed Obligations, including, without limitation, a conveyance of such property by Borrower to Lender by deed in lieu of foreclosure;

(d)

any bankruptcy, insolvency, reorganization, adjustment, dissolution, liquidation or other like proceeding involving or affecting Borrower or Lender or their respective properties or

2

creditors, or any action taken with respect to the Loan Documents by any trustee or receiver of Borrower or Lender, or by any court, in any such proceeding;

(e)

any invalidity or unenforceability, in whole or in part, of any term or provision of the Loan Documents or Borrower’s incapacity or lack of authority to enter into the Loan Documents;

(f)

any release, compromise, settlement or discharge with respect to all or any portion of Borrower’s obligations under the Loan Documents;

(g)

any acceptance of additional or substituted collateral for payment of the Guaranteed Obligations or any release or subordination of any collateral held at any time by Lender as security for the payment of the Guaranteed Obligations; or

(h)

any resort to Guarantor for payment of all or any portion of the Guaranteed Obligations, whether or not Lender shall have resorted to any collateral securing the Guaranteed Obligations, if any, or shall have proceeded to pursue or exhaust its remedies against Borrower (or any other Person) primarily or secondarily liable for the Guaranteed Obligations.

No exercise, delay in exercise or non-exercise by Lender of any right hereby given it, no dealing by Lender with Borrower, Guarantor or any other Person, no change, impairment or suspension of any right or remedy of Lender, and no act or thing which, but for this provision, could act as a release or exoneration of the liabilities of Guarantor hereunder, shall in any way affect, decrease, diminish or impair any of the obligations of Guarantor hereunder or give Guarantor or any other Person any recourse or defense against Lender.

Section 5.

Waiver.  Guarantor unconditionally waives the following:

(a)

notice of acceptance of this Guaranty and notice of any of the matters referred to in Section 4 hereof;

(b)

all notices which may be required by statute, rule of law or otherwise to preserve intact any rights which Lender may have against Guarantor under this Guaranty, including, without limitation, any demand, proof or notice of non-payment of any of the principal of, interest on or other amounts payable under the Loan Documents, and notice of any failure on the part of Borrower to perform and comply with any covenant, agreement, term or condition of the Loan Documents;

(c)

any right to the enforcement, assertion or exercise of any right, power or remedy conferred upon Lender in the Loan Documents or otherwise;

(d)

any requirement that Lender act with diligence in enforcing its rights under the Loan Documents or this Guaranty;

(e)

any right to require Lender to proceed against or exhaust its recourse against Borrower or any security or collateral held by Lender, if any, at any time for the payment of the Guaranteed Obligations or to pursue any other remedy in its power before being entitled to payment from Guarantor under this Guaranty or before proceeding against Guarantor;

(f)

any failure by Lender to file or enforce a claim against the estate (either in administration, bankruptcy or any other proceeding) of Borrower or any other Person;

3

(g)

any defense based upon an election of remedies by Lender which destroys or otherwise impairs the subrogation rights of Guarantor or the right of Guarantor (after payment of the Guaranteed Obligations) to proceed against Borrower for reimbursement, or both;

(h)

any defense based upon any taking, modification or release of any collateral for the Guaranteed Obligations, if any, or any failure to perfect any security interest in, or the taking of, or failure to take any other action with respect to, any collateral securing payment of the Guaranteed Obligations, if any;

(i)

any defense based upon the addition, substitution or release, in whole or in part, of any Person(s), including, without limitation, another guarantor, primarily or secondarily liable for or in respect of the Guaranteed Obligations;

(j)

any rights or defenses based upon an offset by Guarantor against any obligation now or hereafter owed to Guarantor by Borrower; and

(k)

all other notices which may or might be lawfully waived by Guarantor;

it being the intention hereof that Guarantor shall remain liable as principal, to the extent set forth in this Guaranty, until the payment and performance in full of the Guaranteed Obligations, notwithstanding any act, omission or thing which might otherwise operate as a legal or equitable discharge of Guarantor other than the payment and performance in full of the Guaranteed Obligations.  No delay by Lender in exercising any rights and/or powers hereunder or in taking any action to enforce Borrower’s obligations under the Loan Documents shall operate as a waiver as to such rights or powers or in any manner prejudice any and all of Lender’s rights and powers hereunder against Guarantor.  The intention of Guarantor under this Guaranty is that, so long as any of the Guaranteed Obligations remains unsatisfied, the obligations of Guarantor hereunder shall not be discharged except by performance and then only to the extent of such performance.  Guarantor agrees that Guarantor’s obligations hereunder shall not be affected by any circumstances, whether or not referred to in this Guaranty, which might constitute a legal or equitable discharge of a surety or guarantor.

Section 6.

Election of Remedies.  This Guaranty may be enforced from time to time, as often as occasion therefor may arise, and without any requirement that Lender must first pursue or exhaust any remedies available to it against Borrower under the Loan Documents or against any other Person or resort to any collateral at any time held by it for performance of the Guaranteed Obligations, if any, or any other source or means of obtaining payment of any of the Guaranteed Obligations.

Section 7.

Representations and Warranties of Guarantor.  Guarantor hereby represents and warrants to the Lender as follows:

(a)

Due Organization; Qualification.  Guarantor is qualified to transact business and is in good standing in the State in which it is organized and in each other jurisdiction in which such qualification and/or standing is necessary to the conduct of its business and where the failure to be so qualified would adversely affect the validity of, the enforceability of, or the ability of Guarantor to perform the Guaranteed Obligations.

(b)

Power and Authority.  Guarantor has the requisite power and authority (i) to own its properties and to carry on its business as now conducted and as contemplated to be conducted in connection with the performance of the Guaranteed Obligations, and (ii) to execute and deliver this Guaranty and to carry out the transactions contemplated by this Guaranty.

(c)

Due Authorization.  The execution, delivery and performance of this Guaranty has been duly authorized by all necessary action and proceedings by or on behalf of Guarantor,

4

and no further approvals or filings of any kind, including any approval of or filing with any Governmental Authority, are required by or on behalf of Guarantor as a condition to the valid execution, delivery and performance by Guarantor of this Guaranty.

(d)

Valid and Binding Obligations.  This Guaranty has been duly authorized, executed and delivered by Guarantor and constitutes the legal, valid and binding obligations of Guarantor, enforceable against Guarantor in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles affecting the enforcement of creditors’ rights generally or by equitable principles or by the exercise of discretion by any court.

(e)

Non-contravention: No Liens.  Neither the execution and delivery of this Guaranty, nor the fulfillment of or compliance with the terms and conditions of this Guaranty nor the payment or performance of the Guaranteed Obligations:

(i)

does or will conflict with or result in any breach or violation of any Applicable Law enacted or issued by any Governmental Authority or other agency having jurisdiction over Guarantor, any of the Mortgaged Properties or any other portion of the Collateral or assets of Guarantor, or any judgment or order applicable to Guarantor or to which Guarantor is subject;

(ii)

does or will conflict with or result in any material breach or violation of, or constitute a default under, any of the terms, conditions or provisions of Guarantor’s Organizational Documents, any indenture, existing agreement or other instrument to which Guarantor is a party or to which Guarantor, any of the Mortgaged Properties or any other portion of the Collateral or other assets of Guarantor is subject; or

(iii)

does or will require the consent or approval of any creditor of Guarantor, any Governmental Authority or any other Person except such consents or approvals which have already been obtained.

(f)

Pending Litigation or Other Proceedings.  Since the date of the most recent financial statements delivered to Lender pursuant to Section 8(b) of this Guaranty, there is no pending or, to the best knowledge of guarantor, threatened action, suit, proceeding or investigation, at law or in equity, before any court, board, body or official of any Governmental Authority or arbitrator which, if decided adversely to Guarantor, would have, or may reasonably be expected to have, a Material Adverse Effect on Guarantor. Guarantor is not in default with respect to any order of any Governmental Authority to any extent which would have, or may reasonably be expected to have, a Material Adverse Effect on Guarantor.

(g)

Solvency.  Guarantor is not insolvent and will not be rendered insolvent by the transaction contemplated by this Guaranty and after giving effect to such transaction, Guarantor will not be left with an unreasonably small amount of capital with which to engage in its business or undertakings, nor will Guarantor have incurred, have intended to incur, or believe that it has incurred, debts beyond its ability to pay such debts as they mature. Guarantor did not receive less than a reasonably equivalent value in exchange for incurrence of the Guaranteed Obligations.  There (i) is no contemplated, pending or, to the best of Guarantor’s knowledge, threatened bankruptcy, reorganization, receivership, insolvency or like proceeding, whether voluntary or involuntary, affecting Guarantor and (ii) has been no assertion or exercise of jurisdiction over Guarantor by any court empowered to exercise bankruptcy powers.

(h)

No Contractual Defaults.  There are no material defaults by Guarantor or, to the knowledge of Guarantor, by any other Person under any contract to which Guarantor is a party other than defaults which do not have, and are not reasonably be expected to have, a Material Adverse Effect on Guarantor.  Neither Guarantor nor, to the knowledge of Guarantor, any other

5

Person, has received notice or has any knowledge of any existing circumstances in respect of which it could receive any notice of default or breach in respect of any contracts, which default would have, or which may reasonably be expected to have, a Material Adverse Effect on Guarantor.

(i)

Representations True and Correct.  The representations and warranties made by Guarantor in this Guaranty are true, complete and correct in all material respects as of the Initial Closing Date and do not contain any untrue statement of material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.

(j)

ERISA.  Guarantor is in compliance in all material respects with all applicable provisions of ERISA and has not incurred any liability to the PBGC on a Plan under Title LV of ERISA.  None of the assets of Guarantor constitute plan assets (within the meaning of Department of Labor Regulation § 2510.3-101) of any employee benefit plan subject to Title I of ERISA.

(k)

Financial Information.  The financial statements of Guarantor which have been furnished to the Lender are complete and accurate in all material respects and present fairly the financial condition of Guarantor, as of its date in accordance with GAAP, applied on a consistent basis.  Since the date of the most recent of such financial statements no event has occurred which would have, or may reasonably be expected to have a Material Adverse Effect on Guarantor, except as disclosed in any filings made by Guarantor or its affiliates with the United States Securities and Exchange Commission (“SEC”).  Guarantor has no material contingent obligations which are not otherwise disclosed in its most recent financial statements except as disclosed in any filings made by Guarantor or its affiliates with the SEC.

(l)

Accuracy of Information.  No information, statement or report furnished in writing to the Lender by Guarantor concerning the Guarantor in connection with this Guaranty or any other Loan Document or in connection with the consummation of the transactions contemplated hereby and thereby contains any material misstatement of fact or omits to state a material fact necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading as of the date made, except to the extent that such misstatements and omissions when considered in the totality of such information, statements and reports furnished by Guarantor are not materially misleading in the aggregate; provided, however, the foregoing representation and warranty shall not apply to any information, statement or report prepared by any third party.

(m)

No Conflicts of Interest.  To the best knowledge of Guarantor, no member, officer, agent or employee of the Lender has been or is in any manner interested, directly or indirectly, in that Person’s own name, or in the name of any other Person, in the Guarantor (other than through the ownership of publicly traded shares of common stock of affiliates of the Guarantor or limited partnership units of Guarantor), the Loan Documents, or any Mortgaged Property, in any contract for property or materials to be furnished or used in connection with such Mortgaged Property or in any aspect of the transactions contemplated by the Loan Documents.

(n)

Governmental Approvals.  To the best of Guarantor’s knowledge, no Governmental Approval not already obtained or made is required for the execution and delivery of this Guaranty or the performance of the terms and provisions hereof by Guarantor.

(o)

Governmental Orders.  Guarantor is not presently under any cease or desist order or other orders of a similar nature, temporary or permanent, of any Governmental Authority which would have the effect of preventing or hindering performance of its duties hereunder, nor

6

are there any proceedings presently in progress or to its knowledge contemplated which would, if successful, lead to the issuance of any such order.

(p)

No Reliance.  Guarantor acknowledges, represents and warrants that it understands the nature and structure of the transactions contemplated by this Guaranty and the other Loan Documents; that it is familiar with the provisions of all of the documents and instruments relating to such transactions; that it understands the risks inherent in such transactions, including the risk of loss of all or any of the Mortgaged Properties; and that it has not relied on the Lender or Fannie Mae for any guidance or expertise in analyzing the financial or other consequences of the transactions contemplated by this Guaranty or any other Loan Document or otherwise relied on the Lender or Fannie Mae in any manner in connection with interpreting, entering into or otherwise in connection with this Guaranty, any other Loan Document or any of the matters contemplated hereby or thereby.

(q)

Compliance with Applicable Law.  Guarantor is in compliance with Applicable Law, including all Governmental Approvals, if any, except for such items of noncompliance that, singly or in the aggregate, have not had and are not reasonably expected to cause, a Material Adverse Effect on Guarantor.

(r)

Contracts with Affiliates.  Except for the management agreement relating to each of the Mortgaged Properties or in the ordinary course of business and on terms which are no less favorable to the Guarantor than would be obtained in a corporate arms-length transaction with an unrelated third party, Guarantor has not entered into and is not a party to any material contract, lease or other agreement with any Affiliate of Guarantor for the provision of any service, materials or supplies relating to any Mortgaged Property.

Section 8.

Affirmative Covenants of Guarantor.  Guarantor agrees and covenants with the Lender that, at all times during the Term of this Guaranty:

(a)

Maintenance of Existence.  Guarantor shall maintain its existence and continue to be a limited partnership organized under the laws of the state of its organization. Guarantor shall continue to be duly qualified to do business in each jurisdiction in which such qualification is necessary to the conduct of its business and where the failure to be so qualified would adversely affect the validity of, the enforceability of, or the ability to perform, its obligations under this Guaranty.

(b)

Financial Statements; Accountants’ Reports: Other Information.  The Guarantor shall keep and maintain at all times complete and accurate books of accounts and records in sufficient detail to correctly reflect all of the Guarantor’s financial transactions and assets. In addition, the Guarantor shall furnish, or cause to be furnished, to the Lender the following:

(i)

So long as Guarantor is a reporting company under the Securities and Exchange Act of 1934 (the “’34 Act”), promptly upon their becoming available, copies of (A) all 10K’s, 10Q’s, 8K’s, annual reports and proxy statements, and all replacement, substitute or similar filings or reports required to be filed after the date of this Guaranty by the SEC or other Governmental Authority exercising similar functions, and (B) all press releases and other statements made available generally by Guarantor to the public concerning material developments in the business of Guarantor.

(ii)

In the event Guarantor is not a reporting company under the ’34 Act,

(A)

Annual Financial Statements.  As soon as available, and in any event within 90 days after the close of its fiscal year during the Term of this Agreement, the audited balance sheet of Guarantor as of the end of such fiscal year, the audited statement of income, equity and retained earnings of Guarantor

7

for such fiscal year and the audited statement of cash flows of Guarantor for such fiscal year, all in reasonable detail and stating in comparative form the respective figures for the corresponding date and period in the prior fiscal year, prepared in accordance with GAAP, consistently applied, and accompanied by a certificate of Guarantor’s independent certified public accountants to the effect that such financial statements have been prepared in accordance with GAAP, consistently applied, and that such financial statements fairly present the results of its operations and financial condition for the periods and dates indicated with such certification to be free of exceptions and qualifications as to the scope of the audit or as to the going concern nature of the business.

(B)

Quarterly Financial Statements.  As soon as available, and in any event within 45 days after each of the first three fiscal quarters of each fiscal year during the Term of this Agreement, the unaudited balance sheet of Guarantor as of the end of such fiscal quarter, the unaudited statement of income and retained earnings of Guarantor and the unaudited statement of cash flows of Guarantor for the portion of the fiscal year ended with the last day of such quarter, all in reasonable detail and stating in comparative form the respective figures for the corresponding date and period in the previous fiscal year, accompanied by a certificate of a member of Senior Management (which certificate shall be without personal liability to such officer) stating that such financial statements have been prepared in accordance with GAAP, consistently applied, and fairly present th e results of its operations and financial condition for the periods and dates indicated subject to year end adjustments in accordance with GAAP.

(iii)

[Left blank intentionally]

(iv)

Other Reports.  Promptly upon receipt thereof, all schedules, financial statements or other similar reports delivered by the Guarantor pursuant to the Loan Documents or reasonably requested by the Lender with respect to the Guarantor’s business affairs or condition (financial or otherwise) subject to the confidentiality covenant set forth below.  

After the providing by Guarantor of any statement, report or other information on a collective basis to Standard & Poor’s, Moody’s Investors Service, Duff & Phelps, Fitch and/or any other rating agency, and/or after providing any statement, report or other information on a collective basis to the banks or other institutions providing unsecured lines of credit and loans to Guarantor, Guarantor shall promptly furnish such statement, report or other information to Lender.

As used in this Paragraph (iv), the phrase “on a collective basis” means as provided to a group as a whole as opposed to an individual basis, e.g.., providing information to a rating agency or to a bank to respond to a particular request of such rating agency or bank.

The Lender agrees to treat all Information received by it (I) under this Paragraph (iv) as confidential and (II) which Guarantor requests in writing to the Persons at the Lender who receive any Information regarding Guarantor that such information be treated as confidential; provided, however, that such Information may be disclosed (A) as required by law, (B) to officers, directors, employees, agents, partners, attorneys, auditors, accountants, engineers and other consultants of the Lender, or its successors or assigns, who need to know such Information, provided such Persons are instructed to treat such Information confidentially, (C) by the Lender to any successor or assign of such Person, (D) to any federal or state regulatory authority having jurisdiction over the Lender, or its successors or assigns, (E) to any other Person to which such delivery or

8

disclosure may be necessary or appropriate (w) in compliance with any law, rule, regulation or order applicable to the Lender, or its successors or assigns, (x) in response to any subpoena or other legal process or information investigative demand, or (y) in connection with any litigation to which the Lender, or its successors or assigns, is a party.  Guarantor agrees that Information subject to this Paragraph (iv) does not include information which (I) was publicly known, or otherwise known to the Lender, or its successors or assigns, at the time of disclosure, (II) subsequently becomes publicly known through no act of or omission by the Lender or its successors or assigns, other than through disclosure by Guarantor or by any other Person in violation of this Paragraph (iv) or  any other confidentiality arrangement and the Lender, or its successors or assigns, has knowledge of suc h violation; provided, however, that in the event the disclosing Person shall reasonably endeavor to notify Guarantor thereof as soon as possible after such disclosure has been made and Guarantor shall be afford an opportunity to seek protective orders, or such other confidential treatment of such Information as Guarantor may deem reasonable.  

(v)

Certification.  All certifications required to be delivered pursuant to this Section 8(b) shall run directly to and be for the benefit of Lender and Fannie Mae.

(c)

Maintain Licenses.  Guarantor shall procure and maintain in full force and effect all licenses, Permits, charters and registrations which are material to the conduct of its business and shall abide by and satisfy all terms and conditions of all such licenses, Permits, charters and registrations.

(d)

Access to Records; Discussions With Senior Management.  To the extent permitted by law, Guarantor shall permit the Lender to:

(i)

inspect Guarantor’s books and records related to the Borrower and the Mortgaged Property;

(ii)

discuss Guarantor’s affairs, finances and accounts with Guarantor’s Senior Management or, provided that Senior Management of Guarantor has been given the opportunity by Lender to be a party to such discussions, property managers and independent public accountants;

(iii)

provided that Senior Management of Guarantor has been given the opportunity by Lender to be a party to such discussions, discuss the Mortgaged Properties’ conditions, operations or maintenance with the managers of such Mortgaged Properties and the officers and employees of Guarantor; and

(iv)

receive any other information that the Lender deems reasonably necessary or relevant in connection with the Guaranty, any Loan Document or the Guaranteed Obligations.

Notwithstanding the foregoing, prior to an Event of Default or Potential Event of Default, all inspections shall be conducted at reasonable times during normal business hours and upon reasonable notice to the Guarantor.

(e)

Inform the Lender of Material Events.  Guarantor shall promptly, but in any event within five (5) Business Days, inform the Lender in writing of any of the following (and shall deliver to the Lender copies of any related written communications, complaints, orders, judgments and other documents relating to the following) of which Guarantor has actual knowledge:

9

(i)

Defaults.  The occurrence of any Event of Default or any Potential Event of Default under any Loan Document;

(ii)

Bankruptcy Proceedings.  The commencement of any proceedings by or against Guarantor under any applicable bankruptcy, reorganization, liquidation, insolvency or other similar law now or hereafter in effect or of any proceeding in which a receiver, liquidator, trustee or other similar official is sought to be appointed for it;

(iii)

Accounting Changes.  Any material change in Guarantor’s accounting policies or financial reporting practices; and

(iv)

Restructuring of Guarantor.  Any restructuring or reorganization of any Guarantor.

(f)

ERISA.  Guarantor shall at all times remain in compliance in all material respects with all applicable provisions of ERISA and similar requirements of the PBGC.

(g)

Further Assurances.  Provided they do not materially increase the Guaranteed Obligations of Guarantor, Guarantor, at the request of the Lender, but without incurring any liability beyond the Guaranteed Obligations, shall execute and deliver and, if necessary, file or record such statements, documents, agreements, UCC financing and continuation statements and such other instruments and take such further action as the Lender from time to time may request as reasonably necessary, desirable or proper to carry out more effectively the purposes of this Guaranty or any of the other Loan Documents or to subject the Collateral to the lien and security interests of the Loan Documents or to evidence, perfect or otherwise implement, to assure the lien and security interests intended by the terms of the Loan Documents or in order to exercise or enforce its rights under the Loan Documents.

(h)

Monitoring Compliance.  Upon the request of the Lender, but without incurring any liability beyond the Guaranteed Obligations, from time to time, Guarantor shall promptly provide to the Lender such documents, certificates and other information as may be deemed reasonably necessary to enable the Lender to perform its functions under the Servicing Agreement as the same relates to the Guarantor.

Section 9.

Negative Covenants of Guarantor.

(a) Liquidation. Guarantor shall not dissolve or liquidate in whole or in part.

(b) Principal Place of Business. Guarantor shall not change its principal place of business or the location of its books and records without first giving 10 days' prior written notice to the Lender.

Section 10. Financial Covenants. Guarantor agrees and covenants with the Lender that, at all times during the Term of this Guaranty, the Net Worth of the REIT, the Guarantor and the Subsidiaries on a consolidated basis shall not be below $1,500,000,000.

Section 11.

Expenses.  Guarantor agrees to pay all reasonable costs and out-of-pocket expenses, including court costs and expenses and the reasonable fees and disbursements of legal counsel, incurred by or on behalf of Lender in connection with the enforcement of Guarantor’s obligations under this Guaranty or the protection of Lender’s rights under this Guaranty. The covenants contained in this Section shall survive the payment of the Guaranteed Obligations.

Section 12.

Condition of Borrower.  Guarantor is fully aware of the financial condition of Borrower and is executing and delivering this Guaranty based solely upon

10

Guarantor’s own independent investigation of all matters pertinent hereto and is not relying in any manner upon any representation or statement made by Lender. Guarantor represents and warrants that Guarantor is in a position to obtain, and Guarantor hereby assumes full responsibility for obtaining, any additional information concerning Borrower’s financial condition and any other matters pertinent hereto as Guarantor may desire and Guarantor is not relying upon or expecting Lender to furnish to Guarantor any information now or hereafter in Lender’s possession concerning the same or any other matter. By executing this Guaranty, Guarantor knowingly accepts the full range of risks encompassed within a contract of this type, which risks Guarantor acknowledges.

Section 13.

Further Assurances.  Guarantor agrees at any time and from time to time upon request by Lender to take, or cause to be taken, any action and to execute and deliver any additional documents which, in the reasonable opinion of Lender, may be necessary in order to assure to Lender the full benefits of this Guaranty, so long as any such action does not materially increase Guarantor’s Guaranteed Obligations hereunder or materially decrease its rights hereunder.

Section 14.

Subordination.  Guarantor hereby irrevocably and unconditionally agrees that any claims, direct or indirect, Guarantor may have by subrogation or other form of reimbursement, against Borrower or to any security or any interest therein, by virtue of this Guaranty or as a consequence of any payment made by Guarantor pursuant to this Guaranty, shall be fully subordinated in time and right of payment to the payment in full of the Guaranteed Obligations and all other obligations of Guarantor to Lender under this Guaranty.

Section 15.

No Subrogation.  Guarantor shall not have any right of subrogation against Borrower by reason of any payment by Guarantor under this Guaranty until such time as all of the Guaranteed Obligations have been satisfied in full. Nothing in the foregoing shall affect any claim which any Guarantor has against Borrower under the terms of the Organizational Documents of the Borrower.

Section 16.

Insolvency and Liability of Borrower.  So long as any of the Guaranteed Obligations is unpaid and this Guaranty is in effect, and to the extent not prohibited by the applicable bankruptcy court, Guarantor agrees to file all claims against Borrower in any bankruptcy or other proceeding in which the filing of claims is required by law in connection with indebtedness owed by Borrower to Guarantor and to assign to Lender all rights of Guarantor thereunder up to the lesser of (i) the amount of such indebtedness or (ii) the amount of the Guaranteed Obligations.  In all such cases the Person or Persons authorized to pay such claims shall pay to Lender the full amount thereof to the full extent necessary to pay the Guaranteed Obligations, and Guarantor hereby assigns to Lender all of Guarantor’s rights to all such payments to which Guarantor would otherwise be entitled. Notw ithstanding the foregoing, and except to the extent that any sums owed by Borrower to Lender under the Loan Documents shall have been fully satisfied thereby, the liability of Guarantor hereunder shall in no way be affected by

(a)

the release or discharge of Borrower in any creditors’, receivership, bankruptcy or other proceedings; or

(b)

the impairment, limitation or modification of the liability of Borrower or the estate of Borrower in bankruptcy resulting from the operation of any present or future provisions of the Bankruptcy Code or other statute or from the decision in any court.

Section 17.

Preferences, Fraudulent Conveyances, Etc.  If Lender is required to refund, or voluntarily refunds, any payment received from Borrower because such payment is or may be avoided, invalidated, declared fraudulent, set aside or determined to be void or voidable as a preference, fraudulent conveyance, impermissible setoff or a diversion of trust funds under

11

the bankruptcy laws or for any similar reason, including, without limitation, any judgment, order or decree of any court or administrative body having jurisdiction over Lender or any of its property, or any settlement or compromise of any claim effected by Lender with Borrower or other claimant (a “Rescinded Payment”), then Guarantor’s liability to Lender shall continue in full force and effect, or Guarantor’s liability to Lender shall be reinstated, as the case may be, with the same effect and to the same extent as if the Rescinded Payment had not been received by Lender (but only to the extent such Rescinded Payment was part of the Guaranteed Obligations hereunder), notwithstanding the cancellation or termination of any Note or any of the other Loan Documents. In addition, Guarantor shall pay, or reimburse Lender for, all expenses (including all reasona ble attorneys’ fees, court costs and related disbursements) incurred by Lender in the defense of any claim that a payment received by Lender in respect of all or any part of the Guaranteed Obligations from Guarantor must be refunded. The provisions of this Section shall survive the termination of this Guaranty and any satisfaction and discharge of Borrower by virtue of any payment, court order or any federal or state law.

Section 18.

Waiver.  Neither this Guaranty nor any term hereof may be changed, waived, discharged or terminated except by an instrument in writing signed by Lender and Guarantor expressly referring to this Guaranty and to the provisions so changed or limited. No such waiver shall extend to or affect any obligation not expressly waived or impair any right consequent thereon. No course of dealing or delay or omission on the part of Lender in exercising any right under this Guaranty shall operate as a waiver thereof or otherwise by prejudice thereto.

Section 19.

Notices.  All notices or other communications hereunder shall be sufficiently given and shall be deemed given when sent in the manner prescribed by the Loan Agreement addressed to the parties as follows:

As to the Guarantor:

AIMCO

Stanford Place 3

4582 South Ulster St. Parkway

Suite 1100

Denver, Colorado  80237

Attn:  Senior Vice President-Debt & Securities

with a copy to:

Ballard Spahr Andrews & Ingersoll, LLP

Seventeenth Street Plaza Building

1225 17^th Street, Suite 2300

Denver, Colorado 80202

Attn:  Gwendolyn C. Allen, Esquire

If to Lender or Fannie Mae:

As provided in the Loan Agreement.

Section 20.

Assignability by Lender.  Lender may, without notice to Guarantor, assign or transfer the Loans and the Loan Documents, in whole or in part. In such event, each and every immediate and successive assignee, transferee or holder of all or any part of the Loans and the Loan Documents shall have the right to enforce this Guaranty, by legal action or otherwise, as fully as if such assignee, transferee, or holder were by name specifically given such right and power in this Guaranty. Lender shall have an unimpaired right to enforce this Guaranty for its benefit as to so much of the Loans and the Loan Documents as Lender has not sold, assigned or transferred.

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Section 21.

Guarantor Bound by Judgment Against Borrower.  Guarantor shall be conclusively bound, in any jurisdiction, by the judgment in any action by Lender against Borrower in connection with the Loan Documents (wherever instituted) as if Guarantor were a party to such action even if not so joined as a party.

Section 22.

Governing Law.  The provisions of Section 11.06 of the Loan Agreement (entitled Choice of Law; Consent to Jurisdiction; Waiver of Jury Trial) are hereby incorporated into this Agreement by this reference to the fullest extent as if the text of such Section were set forth in its entirety herein.

Section 23.

Invalid Provisions.  If any provision of this Guaranty or the application thereof to Guarantor or any circumstance in any jurisdiction whose laws govern this Guaranty shall, to any extent, be invalid or unenforceable under any applicable statute, regulation or rule of law, then such provision shall be deemed inoperative to the extent of such invalidity or unenforceability and shall be deemed modified to conform to such statute, regulation or rule or law. The remainder of this Guaranty and the application of any such invalid or unenforceable provision to parties, jurisdictions or circumstances other than those to whom or to which it is held invalid or unenforceable, shall not be affected by such invalidity or unenforceability nor shall such invalidity or unenforceability affect the validity or enforceability of any other provision of this Guaranty.

Section 24.

General Provisions.  This Guaranty shall be binding upon the respective successors and assigns of Guarantor, and shall inure to the benefit of Lender and its successors and assigns, including, without limitation, each successive holder of the Note. The descriptive headings of the Sections of the Guaranty have been inserted herein for convenience of reference only and shall not define or limit the provisions hereof.

ATTACHED EXHIBITS.  The following Exhibits are attached to this Instrument:

X Exhibit A Modifications to Guaranty

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]

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IN WITNESS WHEREOF, Guarantor has signed this Guaranty under seal as of the day and year first above written.

THUS DONE AND PASSED, at _______________, ______________, on ______________, ________, in the presence of ____________________ and ____________________ the undersigned witnesses, who sign their names with the appearers and the undersigned Notary Public.

AIMCO PROPERTIES, L.P., a Delaware limited partnership

By:  AIMCO-GP, Inc., a Delaware corporation, its general partner

By: /s/Patti K. Fielding

Patti K. Fielding

Executive Vice President and Treasurer

14

EXHIBIT A

MODIFICATIONS TO GUARANTY

The following modifications are hereby made to the text of the Guaranty that precedes this Exhibit:

1.

A new Section 25 is hereby added as follows:

“Section 25.

Additional Guaranty Relating to Bankruptcy.  

(a)

Notwithstanding any limitation on liability provided for elsewhere in this Guaranty, Guarantor hereby absolutely, unconditionally and irrevocably guarantees to Lender the full and prompt payment when due, whether at the maturity date or earlier, by reason of acceleration or otherwise, and at all times thereafter, the entire Indebtedness, in the event that:

(i)

Borrower voluntarily files for bankruptcy protection under the United States Bankruptcy Code; or

(ii)

Borrower voluntarily becomes subject to any reorganization, receivership, insolvency proceeding, or other similar proceeding pursuant to any other federal or state law affecting debtor and creditor rights; or

(iii)

an order of relief is entered against Borrower pursuant to the United States Bankruptcy Code or other federal or state law affecting debtor and creditor rights in any involuntary bankruptcy proceeding initiated or joined in by a "Related Party."  

(b)

For purposes of this Section, the term "Related Party" means:

(i)

Borrower or Guarantor; and

(ii)

any person or entity that holds, directly or indirectly, any ownership interest in or right to manage Borrower or Guarantor, including without limitation, any shareholder, member or partner of Borrower or Guarantor; and

(iii)

any person or entity in which any ownership interest (direct or indirect) or right to manage is held by Borrower, Guarantor or any partner, shareholder or member of, or any other person or entity holding an interest in, Borrower or Guarantor; and

(iv)

any other creditor of Borrower that is related by blood, marriage or adoption to Borrower, Guarantor or any partner, shareholder or member of, or any

PAGE A-1

other person or entity holding an interest in, Borrower or Guarantor.  

If Borrower, Guarantor or any Related Party has solicited creditors to initiate or participate in any proceeding referred to in this Section, regardless of whether any of the creditors solicited actually initiates or participates in the proceeding, then such proceeding shall be considered as having been initiated by a Related Party.”

_____________

INITIALS

PAGE A-2

EX-10

EXHIBIT 10.56

Vista Village Apartments

MULTIFAMILY NOTE

(VARIABLE LOAN)

US $2,490,138.00

As of January 18, 2007

FOR VALUE RECEIVED, the undersigned (“Borrower”) promises to pay to the order of CAPMARK FINANCE INC., a California corporation, the principal sum of Two Million Four Hundred Ninety Thousand One Hundred Thirty-Eight and 00/100 Dollars (US $2,490,138.00), with interest on each Variable Loan at an annual rate as calculated in Section 3 hereof.

This Note is executed and delivered by Borrower pursuant to one of either (i) that certain Amended and Restated Loan Agreement, dated as of September 16, 2002, by and among certain borrowers signatory thereto and Lender or (ii) that certain Loan Agreement dated as of November 1, 2002, by and among certain borrowers signatory thereto and Lender.  As used herein, the term “Loan Agreement” shall mean whichever of the loan agreements described in the preceding sentence shall apply from time to time in accordance with their respective terms, along with all amendments, supplements, replacements, restatements or other modifications thereto or thereof from time to time made.  The Loan Agreement shall evidence the obligation of Borrower to repay a Variable Loan made by Lender to Borrower in accordance with the terms of the Loan Agreement.  This Note is entitled to the benef it and security of the Loan Documents provided for in the Loan Agreement, to which reference is hereby made for a statement of all of the terms and conditions under which the Variable Loan evidenced hereby is made.  The Loan Agreement requires certain of the terms of each Variable Loan to be evidenced by one or a series of Loan Confirmation Instruments, and reference is hereby made to each such Loan Confirmation Instrument for such terms.

1.

Defined Terms.  As used in this Note, (i) the term “Lender” means the holder of this Note, and (ii) the term “Indebtedness” means the principal of, interest on, or any other amounts due at any time under, this Note, the Security Instrument or any other Loan Document, including prepayment premiums, late charges, default interest, and advances to protect the security of the Security Instrument under Section 12 of the Security Instrument.  Event of Default and other capitalized terms used but not defined in this Note shall have the meanings given to such terms in the Loan Agreement or, if not defined in the Loan Agreement, as defined in the Security Instrument (as defined in Paragraph 5).

2.

Address for Payment.  All payments due under this Note shall be payable at Capmark Finance Inc., 116 Welsh Road, Horsham, PA  19044 , Attention:  Servicing – Account Manager, or such other place as may be designated by written notice to Borrower from or on behalf of Lender.

3.

Payment of Principal and Interest.  Principal and interest shall be paid as follows:

-1-

(a)

This Note shall evidence a Variable Loan made from time to time under the Loan Agreement.  The Variable Loan shall bear interest at a rate determined in accordance with Section 2.01 of the Loan Agreement.

(b)

Borrower shall pay imputed interest on each Variable Loan in advance in the form of a Discount in accordance with Section 1.04(b) of the Loan Agreement (except that Borrower shall pay actual interest on the Variable Loan for the partial month period, if any, in accordance with Section 1.04(a) of the Loan Agreement).  

(c)

Borrower shall make monthly payments of principal each in the amount as set forth on the attached Amortization Schedule.  Lender shall apply each such principal payment to the outstanding principal amount of the Loan on the Rollover Date next following receipt of any such payment.  If not sooner paid, the entire principal amount of the Variable Loan shall be due and payable on the earlier of (i) the termination of the Loan Agreement pursuant to subsection (e) of Section 1.02 thereof, (ii) the fifth anniversary (unless such date is extended pursuant to Section 1.07 of the Loan Agreement, in which case, the tenth anniversary) of the Initial Closing Date or (iii) the maturity date of any outstanding MBS, unless either (A) not less than five Business Days prior to the maturity date of the outstanding MBS, a Borrower has requested that the outstanding MBS be renewed wi th a new MBS or converted to a Fixed Loan to take effect on the maturity date of the outstanding MBS and such new MBS has been issued or conversion has occurred or (B) the MBS is automatically renewed, which automatic renewal shall occur in the event that a Borrower does not make the request set forth in subpart (iii)(A) above and does not give Lender notice not less than five Business days prior to the maturity date of the outstanding MBS that the Variable Loan related to such outstanding MBS shall be paid on the maturity date of such outstanding MBS (the “Maturity Date”).  Any MBS that is issued as a result of an automatic renewal of a maturing MBS as contemplated by subpart (iii)(B) above shall have a maturity date of three (3) months after the MBS Issue Date.  

(d)

In addition to payment of principal and the Discount, Borrower shall pay the Variable Loan Fee due on each Variable Loan in accordance with Section 1.04(b)(ii) of the Loan Agreement.

4.

Application of Payments.  If at any time Lender receives, from Borrower or otherwise, any amount applicable to the Indebtedness that is less than all amounts due and payable at such time, Lender may apply that payment to amounts then due and payable in any manner and in any order determined by Lender, in Lender’s discretion.  Borrower agrees that neither Lender’s acceptance of a payment from Borrower in an amount that is less than all amounts then due and payable nor Lender’s application of such payment shall constitute or be deemed to constitute either a waiver of the unpaid amounts or an accord and satisfaction.

5.

Security.  The Indebtedness is secured, among other things, by a multifamily mortgage, deed to secure debt or deed of trust dated as of the date of this Note (the “Security Instrument”) and reference is made to the Security Instrument for other rights of Lender concerning the collateral for the Indebtedness.

6.

Acceleration.  If an Event of Default has occurred and is continuing, the entire unpaid principal balance, any accrued interest, the prepayment premium payable under Paragraph 10, if any, and all other amounts payable under this Note and any other Loan Document shall at once become due and payable, at the option of Lender, without any additional notice to Borrower.  Lender may exercise this option to accelerate regardless of any prior forbearance.

7.

Late Charge.  If any monthly amount payable under this Note or under the Security Instrument or any other Loan Document is not received by Lender within 10 days after the amount is due, Borrower shall pay to Lender, immediately and without demand by Lender, a

-2-

late charge equal to 5 percent of such amount.  Borrower acknowledges that its failure to make timely payments will cause Lender to incur additional expenses in servicing and processing the loan evidenced by this Note (the “Loan”), and that it is extremely difficult and impractical to determine those additional expenses.  Borrower agrees that the late charge payable pursuant to this Paragraph represents a fair and reasonable estimate, taking into account all circumstances existing on the date of this Note, of the additional expenses Lender will incur by reason of such late payment.  The late charge is payable in addition to, and not in lieu of, any interest payable at the Default Rate pursuant to Paragraph 8.

8.

Default Rate.  So long as any monthly installment or any other payment due under this Note remains past due for 30 days or more, interest under this Note shall accrue on the unpaid principal balance from the earlier of the due date of the first unpaid monthly installment or other payment due, as applicable, at a rate (the “Default Rate”) equal to the lesser of 4 percentage points above the rate stated in the first paragraph of this Note or the maximum interest rate which may be collected from Borrower under applicable law.  If the unpaid principal balance and all accrued interest are not paid in full on the Maturity Date, the unpaid principal balance and all accrued interest shall bear interest from the Maturity Date at the Default Rate.  Borrower also acknowledges that its failure to make timely payments will cause Lender to incur additional expenses in s ervicing and processing the Loan, that, during the time that any monthly installment or payment under this Note is delinquent for more than 30 days, Lender will incur additional costs and expenses arising from its loss of the use of the money due and from the adverse impact on Lender’s ability to meet its other obligations and to take advantage of other investment opportunities, and that it is extremely difficult and impractical to determine those additional costs and expenses.  Borrower also acknowledges that, during the time that any monthly installment or payment due under this Note is delinquent for more than 30 days, Lender’s risk of nonpayment of this Note will be materially increased and Lender is entitled to be compensated for such increased risk.  Borrower agrees that the increase in the rate of interest payable under this Note to the Default Rate represents a fair and reasonable estimate, taking into account all circumstances existing on the date of this Note, of the additional costs and expenses Lender will incur by reason of Borrower’s delinquent payment and the additional compensation Lender is entitled to receive for the increased risks of nonpayment associated with a delinquent loan.

9.

Limits on Personal Liability.

(a)

Except as otherwise provided in this Paragraph 9, Borrower shall have no personal liability under this Note, the Security Instrument or any other Loan Document for the repayment of the Indebtedness or for the performance of any other obligations of Borrower under the Loan Documents, and Lender’s only recourse for the satisfaction of the Indebtedness and the performance of such obligations shall be Lender’s exercise of its rights and remedies with respect to the Mortgaged Property and any other collateral held by Lender as security for the Indebtedness.  This limitation on Borrower’s liability shall not limit or impair Lender’s enforcement of its rights against any guarantor of the Indebtedness or any guarantor of any obligations of Borrower.

(b)

Borrower shall be personally liable to Lender for the repayment of a portion of the Indebtedness equal to any loss or damage suffered by Lender as a result of (1) failure of Borrower to pay to Lender upon demand after an Event of Default, all Rents to which Lender is entitled under Section 3(a) of the Security Instrument and the amount of all security deposits collected by Borrower from tenants then in residence; (2) failure of Borrower to apply all insurance proceeds and condemnation proceeds as required by the Security Instrument; (3) failure of Borrower to comply with Section 14(d) or (e) of the Security Instrument relating to the delivery of books and records, statements, schedules and reports; (4)  fraud or written material misrepresentation by Borrower or any officer, director, partner, member or employee of Borrower in connection with the application for or creation of the Indebtedn ess or any request

-3-

for any action or consent by Lender; or (5) failure to apply Rents, first, to the payment of reasonable operating expenses (other than Property management fees that are not currently payable pursuant to the terms of an Assignment of Management Agreement or any other agreement with Lender executed in connection with the Loan) and then to amounts  (“Debt Service Amounts”) payable under this Note, the Security Instrument or any other Loan Document (except that Borrower will not be personally liable (i) to the extent that Borrower lacks the legal right to direct the disbursement of such sums because of a bankruptcy, receivership or similar judicial proceeding, or (ii) with respect to Rents that are distributed in any calendar year if Borrower has paid all operating expenses and Debt Service Amounts for that calendar year).

(c)

Borrower shall become personally liable to Lender for the repayment of all of the Indebtedness upon the occurrence of any of the following Events of Default: (1) Borrower’s acquisition of any property or operation of any business not permitted by Section 33 of the Security Instrument; or (2) a Transfer that is an Event of Default under Section 21 of the Security Instrument.

(d)

To the extent that Borrower has personal liability under this Paragraph 9, Lender may exercise its rights against Borrower personally without regard to whether Lender has exercised any rights against the Mortgaged Property or any other security, or pursued any rights against any guarantor, or pursued any other rights available to Lender under this Note, the Security Instrument, any other Loan Document or applicable law. For purposes of this Paragraph 9, the term “Mortgaged Property” shall not include any funds that (1) have been applied by Borrower as required or permitted by the Security Instrument prior to the occurrence of an Event of Default, or (2) Borrower was unable to apply as required or permitted by the Security Instrument because of a bankruptcy, receivership, or similar judicial proceeding.

10.

Voluntary and Involuntary Prepayments.  Pursuant to the terms of the Loan Agreement, Borrower shall pay the entire amount of the Discount on any Variable Loan in advance.  Accordingly, any Variable Loan may be prepaid in whole or in part and at any time without penalty.  Borrower shall give Lender six (6) Business Days advance notice of any prepayment.

11.

Costs and Expenses.  Borrower shall pay on demand all reasonable expenses and costs, including reasonable fees and out-of-pocket expenses of attorneys and expert witnesses and costs of investigation, incurred by Lender as a result of any default under this Note or in connection with efforts to collect any amount due under this Note, or to enforce the provisions of any of the other Loan Documents, including those incurred in post-judgment collection efforts and in any bankruptcy proceeding (including any action for relief from the automatic stay of any bankruptcy proceeding) or judicial or non-judicial foreclosure proceeding.

12.

Forbearance.  Any forbearance by Lender in exercising any right or remedy under this Note, the Security Instrument, or any other Loan Document or otherwise afforded by applicable law, shall not be a waiver of or preclude the exercise of that or any other right or remedy.  The acceptance by Lender of any payment after the due date of such payment, or in an amount which is less than the required payment, shall not be a waiver of Lender’s right to require prompt payment when due of all other payments or to exercise any right or remedy with respect to any failure to make prompt payment.  Enforcement by Lender of any security for Borrower’s obligations under this Note shall not constitute an election by Lender of remedies so as to preclude the exercise of any other right or remedy available to Lender.

13.

Waivers.  Except as expressly provided in the Loan Agreement, presentment, demand, notice of dishonor, protest, notice of acceleration, notice of intent to demand or accelerate payment or maturity, presentment for payment, notice of nonpayment, grace, and

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diligence in collecting the Indebtedness are waived by Borrower and all endorsers and guarantors of this Note and all other third party obligors.

14.

Loan Charges.  If any applicable law limiting the amount of interest or other charges permitted to be collected from Borrower in connection with the Loan is interpreted so that any interest or other charge provided for in any Loan Document, whether considered separately or together with other charges provided for in any other Loan Document, violates that law, and Borrower is entitled to the benefit of that law, that interest or charge is hereby reduced to the extent necessary to eliminate that violation.  Borrower agrees to an effective rate of interest that is the stated rate of interest plus any additional rate of interest resulting from any other charges or fees that are to be paid by Borrower to Lender that may be found by a court of competent jurisdiction to be interest.  The amounts, if any, previously paid to Lender in excess of the permitted amounts shall be applie d by Lender to reduce the unpaid principal balance of this Note.  For the purpose of determining whether any applicable law limiting the amount of interest or other charges permitted to be collected from Borrower has been violated, all Indebtedness that constitutes interest, as well as all other charges made in connection with the Indebtedness that constitute interest, shall be deemed to be allocated and spread ratably over the stated term of the Note.  Unless otherwise required by applicable law, such allocation and spreading shall be effected in such a manner that the rate of interest so computed is uniform throughout the stated term of the Note.

15.

Commercial Purpose.  Borrower represents that the Indebtedness is being incurred by Borrower solely for the purpose of carrying on a business or commercial enterprise, and not for personal, family or household purposes.

16.

Counting of Days.  Except where otherwise specifically provided, any reference in this Note to a period of “days” means calendar days, not Business Days.

17.

Governing Law; Consent to Jurisdiction; WAIVER OF JURY TRIAL.  The provisions of Section 11.07 of the Loan Agreement (entitled “Choice of Law; Consent to Jurisdiction; Waiver of Jury Trial”) are hereby incorporated into this Note by this reference to the fullest extent as if the text of such Section were set forth in its entirety herein.

18.

Captions.  The captions of the paragraphs of this Note are for convenience only and shall be disregarded in construing this Note.

19.

Notices.  All notices, demands and other communications required or permitted to be given by Lender to Borrower pursuant to this Note shall be given in accordance with Section 11.09 of the Loan Agreement.

20.

Security for this Note.  Reference is made hereby to the Loan Agreement and the Security Documents for additional rights and remedies of Lender relating to the indebtedness evidenced by this Note.  Each Security Document shall be released in accordance with the provisions of the Security Documents.

21.

Loan May Not Be Reborrowed.  Borrower may not re-borrow any amounts under this Note which it has previously borrowed and repaid under this Note.

22.

Default Under Loan Agreement and Other Loan Documents.  The occurrence of an Event of Default under the Loan Agreement or the Security Instrument shall constitute an “Event of Default” under this Note in accordance with the Loan Agreement and the Security Instrument.  Upon the occurrence of an Event of Default under the Loan Agreement or the Security Instrument, the entire principal amount outstanding hereunder and accrued interest thereon shall at once become due and payable, at the option of the holder hereof.

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23.

Loan Confirmation Instruments; Accounting for Variable Loans.  The terms of the Loan Agreement and this Note govern the repayment, and all other terms relating to the Variable Loan.  However, Borrower shall execute a Loan Confirmation Instrument to create a physical instrument evidencing each MBS issued to fund the Variable Loan.  The Loan Confirmation Instrument executed by Borrower in accordance with Section 2.02 of the Loan Agreement shall set forth the amount, term, Discount, Closing Date and certain other terms of each MBS issued to fund the Variable Loan.  The Loan Confirmation Instrument shall conclusively establish each of the terms described in the preceding sentence, absent manifest error.  The MBS evidenced by the Loan Confirmation Instrument does not represent a separate indebtedness from that evidenced by this Note.   In making proof of thi s Note, no other documents other than this Note shall be required.  In making proof of the amount and terms of the outstanding Variable Loans under this Note, this Note, the related Loan Confirmation Instruments, and Lender’s records concerning payments made by Borrower under this Note, shall be conclusive evidence of the terms and outstanding amounts of the Variable Loan, absent manifest error.

24.

Modifications to Note.  There are standard modifications to this Note that are attached as Exhibit B-1 and Exhibit B-2 hereto.  In addition, there may be special modifications to this Note attached as Exhibit B-3 hereto.  All such exhibits are hereby incorporated into this Note as a part hereof.

IN WITNESS WHEREOF, Borrower has signed and delivered this Note under seal or has caused this Note to be signed and delivered under seal by its duly authorized representative.  Borrower intends that this Note shall be deemed to be signed and delivered as a sealed instrument.

[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]

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VMS NATIONAL PROPERTIES, an Illinois joint venture general partnership

By:  VMS National Residential Portfolio I, an Illinois limited partnership, its joint venture partner

By:  Maeril, Inc., a Delaware corporation, its general partner

By: /s/Patti K. Fielding

Patti K. Fielding

Executive Vice President and Treasurer

By:  VMS National Residential Portfolio II, an Illinois limited partnership, its joint venture partner

By:  Maeril, Inc., a Delaware corporation, its general partner

By: /s/Patti K. Fielding

Patti K. Fielding

Executive Vice President and Treasurer

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PAY TO THE ORDER OF FANNIE MAE, WITHOUT RECOURSE.

CAPMARK FINANCE INC., a California corporation

By:/s/ Max W. Foore

Max W. Foore

Vice President

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EXHIBIT B-1

GMACCM LOAN AGREEMENT MODIFICATIONS

During any time that the terms, covenants and provisions of that certain Loan Agreement dated as of November 1, 2002 and more particularly described in the second paragraph on page 1 of the Note apply to the Variable Loan evidenced by the Note, paragraphs 3 and 23 of the Note are amended and replaced with the following substitute paragraphs 3 and 23:

“3.

Payment of Principal and Interest.  Principal and interest shall be paid as follows:

(a)

This Note shall evidence a Variable Loan made from time to time under the Loan Agreement.  Borrower shall not be required to make monthly principal payments prior to the Fannie Mae Addition Date, but shall make monthly payments of principal after the Fannie Mae Reassignment Date, if it occurs, as set forth in Section 1.04(d) of the Loan Agreement.

(b)

Borrower shall pay actual interest on the Variable Loan during the period described in accordance with Section 1.04(a) of the Loan Agreement.  Borrower shall pay interest on its Variable Rate Loan in arrears at a rate equal to LIBOR Rate plus a number of basis points determined in accordance with Section 2.01 of the Loan Agreement.  For purposes of the previous sentence, the LIBOR Rate shall be reset every ninety (90) days commencing on the date that is ninety (90) days after the Initial Closing Date.  On the date the Variable Loan is funded, Borrower shall pay interest in advance from the date of funding through January 31, 2007.  On March 1, 2007 and on the first (1st) day of each calendar month thereafter, Borrower shall pay interest in arrears calculated for the actual number of days since the first (1st) day of the previous calendar month.

(c)

If not sooner paid, the entire principal amount of the Variable Loan shall be due and payable in accordance with Section 1.02 of the Loan Agreement.  

(d)

Borrower shall not pay any Discount.

23.

Loan Confirmation Instruments; Accounting for Variable Loans.  The terms of the Loan Agreement and this Note govern the repayment, and all other terms relating to the Variable Loan.  However, Borrower shall execute one or a series of Loan Confirmation Instruments to create a physical instrument evidencing the terms of the Variable Loan.  The Loan Confirmation Instrument or series of Loan Confirmation Instruments executed by Borrower in accordance with Section 2.02 of the Loan Agreement shall set forth the amount, term, the interest rate spread over the LIBOR Rate Closing Date and certain other terms related to the funding the Variable Loan.  The Loan Confirmation Instrument shall conclusively establish each of the terms described in the preceding sentence, absent manifest error.  The variable terms evidenced by the Loan Confirmation Instrument do not represe nt a separate indebtedness from that evidenced by this Note.   In making proof of this Note, no other documents other than this Note shall be required.  In making proof of the amount and terms of the outstanding Variable Loans under this Note, this Note, the related Loan Confirmation Instruments, and Lender’s records concerning payments made by Borrower under this Note, shall be conclusive evidence of the terms and outstanding amounts of the Variable Loan, absent manifest error.”

During any time that the terms, covenants and provisions of that certain Amended and Restated Loan Agreement dated as of September 16, 2002 and more particularly described in the second paragraph on page 1 of the Note apply to the Variable Loan evidenced by the Note, this Exhibit B-1 shall not apply and paragraphs 3 and 23 of the Note shall not be amended or replaced with the provisions set forth in this Exhibit B-1.

B-1

EXHIBIT B-2

AIMCO MODIFICATIONS

The following modifications are made to the text of the Note that precedes this Exhibit:

1.

Section 9(b)(4) is modified by deleting “or” at the end thereof.

2.

Section 9(b)(5) is modified to read as follows:

“(5) failure to apply Rents, first, to the payment of reasonable operating expenses (other than Property management fees that are not currently payable pursuant to the terms of an Assignment of Management Agreement or any other agreement with Lender executed in connection with the Loan) and then to amounts (“Debt Service Amounts”) payable under this Note, the Security Instrument or any other Loan Document (except that Borrower will not be personally liable (i) to the extent that Borrower lacks the legal right to direct the disbursement of such sums because of a bankruptcy, receivership or similar judicial proceeding, or (ii) with respect to Rents that are distributed in any calendar quarter if Borrower has paid all operating expenses and Debt Service Amounts for such calendar quarter to date); or”

3.

A new Section 9(b)(6) is added following Section 9(b)(5), stating as follows:

“(6) failure to pay when due any water and sewer charges, fire, hazard or other insurance premiums and ground rents owing from time to time in connection with the Mortgaged Property.”

B-2

EX-10

EXHIBIT 10.57

Vista Village Apartments

GUARANTY

This Guaranty (the “Guaranty”) is made and entered into as of the 18th day of January, 2007 by AIMCO PROPERTIES, L.P., a Delaware limited partnership (the “Guarantor”), for the benefit of CAPMARK FINANCE INC., a California corporation (“Lender”).

RECITALS

A.

Lender has agreed to execute both (i) that certain Amended and Restated Loan Agreement, dated as of September 16, 2002, by and among AIMCO Properties, L.P., a Delaware limited partnership, certain borrowers signatory thereto and Lender and (ii) that certain Loan Agreement dated as of November 1, 2002, by and among certain borrowers signatory thereto and Lender (as amended, supplemental or otherwise modified or amended and restated from time to time, the “Loan Agreement”),  pursuant to which, inter alia, Lender has agreed, subject to the terms, conditions and limitations of the Loan Agreement, to make a loan to VMS National Properties, an Illinois joint venture general partnership (the “Borrower”) from time to time loan to be evidenced by the Note (the “Loan”).  Terms used herein not defined herein have the definition given them in the Loan Agreement.

B.

The repayment of the Loan and all of the Obligations of the Borrower under the Loan Agreement or the other Loan Documents are guaranteed by this Guaranty to the extent of Borrower’s personal liability as provided in Section 9 of the Note evidencing the Loan, and except for such obligations described herein, Guarantor shall have no liability in connection with, or responsibility to perform, under or in accordance with the Loan Agreement or other Loan Documents.

C.

Guarantor owns, directly or indirectly, an ownership interest in the Borrower and will receive a direct and material benefit from the Loans to the Borrower.

D.

Lender is willing to make the Loan to the Borrower only if Guarantor agrees to enter into this Guaranty.

NOW, THEREFORE, in order to induce Lender to make the Loan to Borrower, and in consideration thereof, Guarantor hereby agrees as follows:

Section 1.

Definitions.  All capitalized terms used but not defined in this Guaranty shall have the meanings ascribed to such terms in the Loan Agreement.  The following terms shall have the meaning set forth below for purposes of this Guaranty:

“Material Adverse Effect” means, with respect to any circumstance, act, condition or event of whatever nature (including any adverse determination in any litigation, arbitration, or governmental investigation or proceeding), whether singly or in conjunction with any other event or events, act or acts, condition or conditions, or circumstance or circumstances, whether or not related, a material adverse change in or a materially adverse effect upon the present or future ability of the Guarantor, to the extent specifically referred to in the applicable provision of that Guaranty, to perform the Guaranteed Obligations.

“Net Worth” means, as of any date of determination and without double counting any item, the sum of the capital stock or other capital equity interests and additional paid-in capital

1

plus retained earnings (or minus accumulated deficits) of the Guarantor, the REIT and their respective Subsidiaries on a consolidated basis determined in conformity with GAAP.

“REIT” means Apartment Investment and Management Company, a Maryland corporation.

“Subsidiary” means, with respect to the REIT, the Guarantor or an Affiliate of either of them, a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise controlled, directly or indirectly, through one or more intermediaries, or both, by the REIT, the Guarantor or an Affiliate of either of them.

Section 2.

Guaranty of Payment.  Guarantor irrevocably, absolutely and unconditionally guarantees to Lender all of the following (collectively, the “Guaranteed Obligations”):  the due and punctual payment when due, whether at maturity or earlier, by reason of acceleration or otherwise, at all times, of all amounts for which Borrower is personally liable under Section 9 of the Note.

This Guaranty shall be an unconditional guaranty of payment and performance and not of collection, and is in no way conditioned upon any attempt by Lender to pursue or exhaust any remedy against Borrower.  This Guaranty is a continuing guaranty which shall remain in full force and effect until all of the Guaranteed Obligations have been paid and performed in full; and Guarantor shall not be released from any obligations to Lender under this Guaranty as long as any amount payable by the Borrower to Lender, or any obligation by the Borrower, under the Loan Documents is not performed, satisfied, settled or paid in full.

Section 3.

Form of Payment.  All payments under this Guaranty shall be made to Lender in immediately available funds, without reduction by any recoupment, set-off, counterclaim or cross-claim against Lender.

Section 4.

Guarantor’s Obligations are Absolute.  The obligations of Guarantor under this Guaranty shall be absolute and unconditional, shall not be subject to any counterclaim, set-off, recoupment, deduction, or defense based upon any claim Guarantor may have against Lender or Borrower and shall remain in full force and effect without regard to, and shall not be released, discharged or terminated or in any other way affected by, any circumstance or condition (whether or not Guarantor shall have any knowledge or notice thereof), including, without limitation:

(a)

any amendment or modification of, or extension of time for payment of any of the principal of, interest on or other amounts payable under the Loan Documents;

(b)

any exercise or non-exercise by Lender of any right, power or remedy under or in respect of the Loan Documents, or any waiver, consent, forbearance, indulgence or other action, inaction or omission by Lender under or in respect of the Loan Documents;

(c)

any assignment, sale or other transfer of Borrower’s interest in all or any part of the real or personal property which at any time constitutes collateral for the payment of the Guaranteed Obligations, including, without limitation, a conveyance of such property by Borrower to Lender by deed in lieu of foreclosure;

(d)

any bankruptcy, insolvency, reorganization, adjustment, dissolution, liquidation or other like proceeding involving or affecting Borrower or Lender or their respective properties or

2

creditors, or any action taken with respect to the Loan Documents by any trustee or receiver of Borrower or Lender, or by any court, in any such proceeding;

(e)

any invalidity or unenforceability, in whole or in part, of any term or provision of the Loan Documents or Borrower’s incapacity or lack of authority to enter into the Loan Documents;

(f)

any release, compromise, settlement or discharge with respect to all or any portion of Borrower’s obligations under the Loan Documents;

(g)

any acceptance of additional or substituted collateral for payment of the Guaranteed Obligations or any release or subordination of any collateral held at any time by Lender as security for the payment of the Guaranteed Obligations; or

(h)

any resort to Guarantor for payment of all or any portion of the Guaranteed Obligations, whether or not Lender shall have resorted to any collateral securing the Guaranteed Obligations, if any, or shall have proceeded to pursue or exhaust its remedies against Borrower (or any other Person) primarily or secondarily liable for the Guaranteed Obligations.

No exercise, delay in exercise or non-exercise by Lender of any right hereby given it, no dealing by Lender with Borrower, Guarantor or any other Person, no change, impairment or suspension of any right or remedy of Lender, and no act or thing which, but for this provision, could act as a release or exoneration of the liabilities of Guarantor hereunder, shall in any way affect, decrease, diminish or impair any of the obligations of Guarantor hereunder or give Guarantor or any other Person any recourse or defense against Lender.

Section 5.

Waiver.  Guarantor unconditionally waives the following:

(a)

notice of acceptance of this Guaranty and notice of any of the matters referred to in Section 4 hereof;

(b)

all notices which may be required by statute, rule of law or otherwise to preserve intact any rights which Lender may have against Guarantor under this Guaranty, including, without limitation, any demand, proof or notice of non-payment of any of the principal of, interest on or other amounts payable under the Loan Documents, and notice of any failure on the part of Borrower to perform and comply with any covenant, agreement, term or condition of the Loan Documents;

(c)

any right to the enforcement, assertion or exercise of any right, power or remedy conferred upon Lender in the Loan Documents or otherwise;

(d)

any requirement that Lender act with diligence in enforcing its rights under the Loan Documents or this Guaranty;

(e)

any right to require Lender to proceed against or exhaust its recourse against Borrower or any security or collateral held by Lender, if any, at any time for the payment of the Guaranteed Obligations or to pursue any other remedy in its power before being entitled to payment from Guarantor under this Guaranty or before proceeding against Guarantor;

(f)

any failure by Lender to file or enforce a claim against the estate (either in administration, bankruptcy or any other proceeding) of Borrower or any other Person;

3

(g)

any defense based upon an election of remedies by Lender which destroys or otherwise impairs the subrogation rights of Guarantor or the right of Guarantor (after payment of the Guaranteed Obligations) to proceed against Borrower for reimbursement, or both;

(h)

any defense based upon any taking, modification or release of any collateral for the Guaranteed Obligations, if any, or any failure to perfect any security interest in, or the taking of, or failure to take any other action with respect to, any collateral securing payment of the Guaranteed Obligations, if any;

(i)

any defense based upon the addition, substitution or release, in whole or in part, of any Person(s), including, without limitation, another guarantor, primarily or secondarily liable for or in respect of the Guaranteed Obligations;

(j)

any rights or defenses based upon an offset by Guarantor against any obligation now or hereafter owed to Guarantor by Borrower; and

(k)

all other notices which may or might be lawfully waived by Guarantor;

it being the intention hereof that Guarantor shall remain liable as principal, to the extent set forth in this Guaranty, until the payment and performance in full of the Guaranteed Obligations, notwithstanding any act, omission or thing which might otherwise operate as a legal or equitable discharge of Guarantor other than the payment and performance in full of the Guaranteed Obligations.  No delay by Lender in exercising any rights and/or powers hereunder or in taking any action to enforce Borrower’s obligations under the Loan Documents shall operate as a waiver as to such rights or powers or in any manner prejudice any and all of Lender’s rights and powers hereunder against Guarantor.  The intention of Guarantor under this Guaranty is that, so long as any of the Guaranteed Obligations remains unsatisfied, the obligations of Guarantor hereunder shall not be discharged except by performance and then only to the extent of such performance.  Guarantor agrees that Guarantor’s obligations hereunder shall not be affected by any circumstances, whether or not referred to in this Guaranty, which might constitute a legal or equitable discharge of a surety or guarantor.

Section 6.

Election of Remedies.  This Guaranty may be enforced from time to time, as often as occasion therefor may arise, and without any requirement that Lender must first pursue or exhaust any remedies available to it against Borrower under the Loan Documents or against any other Person or resort to any collateral at any time held by it for performance of the Guaranteed Obligations, if any, or any other source or means of obtaining payment of any of the Guaranteed Obligations.

Section 7.

Representations and Warranties of Guarantor.  Guarantor hereby represents and warrants to the Lender as follows:

(a)

Due Organization; Qualification.  Guarantor is qualified to transact business and is in good standing in the State in which it is organized and in each other jurisdiction in which such qualification and/or standing is necessary to the conduct of its business and where the failure to be so qualified would adversely affect the validity of, the enforceability of, or the ability of Guarantor to perform the Guaranteed Obligations.

(b)

Power and Authority.  Guarantor has the requisite power and authority (i) to own its properties and to carry on its business as now conducted and as contemplated to be conducted in connection with the performance of the Guaranteed Obligations, and (ii) to execute and deliver this Guaranty and to carry out the transactions contemplated by this Guaranty.

(c)

Due Authorization.  The execution, delivery and performance of this Guaranty has been duly authorized by all necessary action and proceedings by or on behalf of Guarantor,

4

and no further approvals or filings of any kind, including any approval of or filing with any Governmental Authority, are required by or on behalf of Guarantor as a condition to the valid execution, delivery and performance by Guarantor of this Guaranty.

(d)

Valid and Binding Obligations.  This Guaranty has been duly authorized, executed and delivered by Guarantor and constitutes the legal, valid and binding obligations of Guarantor, enforceable against Guarantor in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles affecting the enforcement of creditors’ rights generally or by equitable principles or by the exercise of discretion by any court.

(e)

Non-contravention: No Liens.  Neither the execution and delivery of this Guaranty, nor the fulfillment of or compliance with the terms and conditions of this Guaranty nor the payment or performance of the Guaranteed Obligations:

(i)

does or will conflict with or result in any breach or violation of any Applicable Law enacted or issued by any Governmental Authority or other agency having jurisdiction over Guarantor, any of the Mortgaged Properties or any other portion of the Collateral or assets of Guarantor, or any judgment or order applicable to Guarantor or to which Guarantor is subject;

(ii)

does or will conflict with or result in any material breach or violation of, or constitute a default under, any of the terms, conditions or provisions of Guarantor’s Organizational Documents, any indenture, existing agreement or other instrument to which Guarantor is a party or to which Guarantor, any of the Mortgaged Properties or any other portion of the Collateral or other assets of Guarantor is subject; or

(iii)

does or will require the consent or approval of any creditor of Guarantor, any Governmental Authority or any other Person except such consents or approvals which have already been obtained.

(f)

Pending Litigation or Other Proceedings.  Since the date of the most recent financial statements delivered to Lender pursuant to Section 8(b) of this Guaranty, there is no pending or, to the best knowledge of guarantor, threatened action, suit, proceeding or investigation, at law or in equity, before any court, board, body or official of any Governmental Authority or arbitrator which, if decided adversely to Guarantor, would have, or may reasonably be expected to have, a Material Adverse Effect on Guarantor. Guarantor is not in default with respect to any order of any Governmental Authority to any extent which would have, or may reasonably be expected to have, a Material Adverse Effect on Guarantor.

(g)

Solvency.  Guarantor is not insolvent and will not be rendered insolvent by the transaction contemplated by this Guaranty and after giving effect to such transaction, Guarantor will not be left with an unreasonably small amount of capital with which to engage in its business or undertakings, nor will Guarantor have incurred, have intended to incur, or believe that it has incurred, debts beyond its ability to pay such debts as they mature. Guarantor did not receive less than a reasonably equivalent value in exchange for incurrence of the Guaranteed Obligations.  There (i) is no contemplated, pending or, to the best of Guarantor’s knowledge, threatened bankruptcy, reorganization, receivership, insolvency or like proceeding, whether voluntary or involuntary, affecting Guarantor and (ii) has been no assertion or exercise of jurisdiction over Guarantor by any court empowered to exercise bankruptcy powers.

(h)

No Contractual Defaults.  There are no material defaults by Guarantor or, to the knowledge of Guarantor, by any other Person under any contract to which Guarantor is a party other than defaults which do not have, and are not reasonably be expected to have, a Material Adverse Effect on Guarantor.  Neither Guarantor nor, to the knowledge of Guarantor, any other

5

Person, has received notice or has any knowledge of any existing circumstances in respect of which it could receive any notice of default or breach in respect of any contracts, which default would have, or which may reasonably be expected to have, a Material Adverse Effect on Guarantor.

(i)

Representations True and Correct.  The representations and warranties made by Guarantor in this Guaranty are true, complete and correct in all material respects as of the Initial Closing Date and do not contain any untrue statement of material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.

(j)

ERISA.  Guarantor is in compliance in all material respects with all applicable provisions of ERISA and has not incurred any liability to the PBGC on a Plan under Title LV of ERISA.  None of the assets of Guarantor constitute plan assets (within the meaning of Department of Labor Regulation § 2510.3-101) of any employee benefit plan subject to Title I of ERISA.

(k)

Financial Information.  The financial statements of Guarantor which have been furnished to the Lender are complete and accurate in all material respects and present fairly the financial condition of Guarantor, as of its date in accordance with GAAP, applied on a consistent basis.  Since the date of the most recent of such financial statements no event has occurred which would have, or may reasonably be expected to have a Material Adverse Effect on Guarantor, except as disclosed in any filings made by Guarantor or its affiliates with the United States Securities and Exchange Commission (“SEC”).  Guarantor has no material contingent obligations which are not otherwise disclosed in its most recent financial statements except as disclosed in any filings made by Guarantor or its affiliates with the SEC.

(l)

Accuracy of Information.  No information, statement or report furnished in writing to the Lender by Guarantor concerning the Guarantor in connection with this Guaranty or any other Loan Document or in connection with the consummation of the transactions contemplated hereby and thereby contains any material misstatement of fact or omits to state a material fact necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading as of the date made, except to the extent that such misstatements and omissions when considered in the totality of such information, statements and reports furnished by Guarantor are not materially misleading in the aggregate; provided, however, the foregoing representation and warranty shall not apply to any information, statement or report prepared by any third party.

(m)

No Conflicts of Interest.  To the best knowledge of Guarantor, no member, officer, agent or employee of the Lender has been or is in any manner interested, directly or indirectly, in that Person’s own name, or in the name of any other Person, in the Guarantor (other than through the ownership of publicly traded shares of common stock of affiliates of the Guarantor or limited partnership units of Guarantor), the Loan Documents, or any Mortgaged Property, in any contract for property or materials to be furnished or used in connection with such Mortgaged Property or in any aspect of the transactions contemplated by the Loan Documents.

(n)

Governmental Approvals.  To the best of Guarantor’s knowledge, no Governmental Approval not already obtained or made is required for the execution and delivery of this Guaranty or the performance of the terms and provisions hereof by Guarantor.

(o)

Governmental Orders.  Guarantor is not presently under any cease or desist order or other orders of a similar nature, temporary or permanent, of any Governmental Authority which would have the effect of preventing or hindering performance of its duties hereunder, nor

6

are there any proceedings presently in progress or to its knowledge contemplated which would, if successful, lead to the issuance of any such order.

(p)

No Reliance.  Guarantor acknowledges, represents and warrants that it understands the nature and structure of the transactions contemplated by this Guaranty and the other Loan Documents; that it is familiar with the provisions of all of the documents and instruments relating to such transactions; that it understands the risks inherent in such transactions, including the risk of loss of all or any of the Mortgaged Properties; and that it has not relied on the Lender or Fannie Mae for any guidance or expertise in analyzing the financial or other consequences of the transactions contemplated by this Guaranty or any other Loan Document or otherwise relied on the Lender or Fannie Mae in any manner in connection with interpreting, entering into or otherwise in connection with this Guaranty, any other Loan Document or any of the matters contemplated hereby or thereby.

(q)

Compliance with Applicable Law.  Guarantor is in compliance with Applicable Law, including all Governmental Approvals, if any, except for such items of noncompliance that, singly or in the aggregate, have not had and are not reasonably expected to cause, a Material Adverse Effect on Guarantor.

(r)

Contracts with Affiliates.  Except for the management agreement relating to each of the Mortgaged Properties or in the ordinary course of business and on terms which are no less favorable to the Guarantor than would be obtained in a corporate arms-length transaction with an unrelated third party, Guarantor has not entered into and is not a party to any material contract, lease or other agreement with any Affiliate of Guarantor for the provision of any service, materials or supplies relating to any Mortgaged Property.

Section 8.

Affirmative Covenants of Guarantor.  Guarantor agrees and covenants with the Lender that, at all times during the Term of this Guaranty:

(a)

Maintenance of Existence.  Guarantor shall maintain its existence and continue to be a limited partnership organized under the laws of the state of its organization. Guarantor shall continue to be duly qualified to do business in each jurisdiction in which such qualification is necessary to the conduct of its business and where the failure to be so qualified would adversely affect the validity of, the enforceability of, or the ability to perform, its obligations under this Guaranty.

(b)

Financial Statements; Accountants’ Reports: Other Information.  The Guarantor shall keep and maintain at all times complete and accurate books of accounts and records in sufficient detail to correctly reflect all of the Guarantor’s financial transactions and assets. In addition, the Guarantor shall furnish, or cause to be furnished, to the Lender the following:

(i)

So long as Guarantor is a reporting company under the Securities and Exchange Act of 1934 (the “’34 Act”), promptly upon their becoming available, copies of (A) all 10K’s, 10Q’s, 8K’s, annual reports and proxy statements, and all replacement, substitute or similar filings or reports required to be filed after the date of this Guaranty by the SEC or other Governmental Authority exercising similar functions, and (B) all press releases and other statements made available generally by Guarantor to the public concerning material developments in the business of Guarantor.

(ii)

In the event Guarantor is not a reporting company under the ’34 Act,

(A)

Annual Financial Statements.  As soon as available, and in any event within 90 days after the close of its fiscal year during the Term of this Agreement, the audited balance sheet of Guarantor as of the end of such fiscal year, the audited statement of income, equity and retained earnings of Guarantor

7

for such fiscal year and the audited statement of cash flows of Guarantor for such fiscal year, all in reasonable detail and stating in comparative form the respective figures for the corresponding date and period in the prior fiscal year, prepared in accordance with GAAP, consistently applied, and accompanied by a certificate of Guarantor’s independent certified public accountants to the effect that such financial statements have been prepared in accordance with GAAP, consistently applied, and that such financial statements fairly present the results of its operations and financial condition for the periods and dates indicated with such certification to be free of exceptions and qualifications as to the scope of the audit or as to the going concern nature of the business.

(B)

Quarterly Financial Statements.  As soon as available, and in any event within 45 days after each of the first three fiscal quarters of each fiscal year during the Term of this Agreement, the unaudited balance sheet of Guarantor as of the end of such fiscal quarter, the unaudited statement of income and retained earnings of Guarantor and the unaudited statement of cash flows of Guarantor for the portion of the fiscal year ended with the last day of such quarter, all in reasonable detail and stating in comparative form the respective figures for the corresponding date and period in the previous fiscal year, accompanied by a certificate of a member of Senior Management (which certificate shall be without personal liability to such officer) stating that such financial statements have been prepared in accordance with GAAP, consistently applied, and fairly present th e results of its operations and financial condition for the periods and dates indicated subject to year end adjustments in accordance with GAAP.

(iii)

[Left blank intentionally]

(iv)

Other Reports.  Promptly upon receipt thereof, all schedules, financial statements or other similar reports delivered by the Guarantor pursuant to the Loan Documents or reasonably requested by the Lender with respect to the Guarantor’s business affairs or condition (financial or otherwise) subject to the confidentiality covenant set forth below.  

After the providing by Guarantor of any statement, report or other information on a collective basis to Standard & Poor’s, Moody’s Investors Service, Duff & Phelps, Fitch and/or any other rating agency, and/or after providing any statement, report or other information on a collective basis to the banks or other institutions providing unsecured lines of credit and loans to Guarantor, Guarantor shall promptly furnish such statement, report or other information to Lender.

As used in this Paragraph (iv), the phrase “on a collective basis” means as provided to a group as a whole as opposed to an individual basis, e.g.., providing information to a rating agency or to a bank to respond to a particular request of such rating agency or bank.

The Lender agrees to treat all Information received by it (I) under this Paragraph (iv) as confidential and (II) which Guarantor requests in writing to the Persons at the Lender who receive any Information regarding Guarantor that such information be treated as confidential; provided, however, that such Information may be disclosed (A) as required by law, (B) to officers, directors, employees, agents, partners, attorneys, auditors, accountants, engineers and other consultants of the Lender, or its successors or assigns, who need to know such Information, provided such Persons are instructed to treat such Information confidentially, (C) by the Lender to any successor or assign of such Person, (D) to any federal or state regulatory authority having jurisdiction over the Lender, or its successors or assigns, (E) to any other Person to which such delivery or

8

disclosure may be necessary or appropriate (w) in compliance with any law, rule, regulation or order applicable to the Lender, or its successors or assigns, (x) in response to any subpoena or other legal process or information investigative demand, or (y) in connection with any litigation to which the Lender, or its successors or assigns, is a party.  Guarantor agrees that Information subject to this Paragraph (iv) does not include information which (I) was publicly known, or otherwise known to the Lender, or its successors or assigns, at the time of disclosure, (II) subsequently becomes publicly known through no act of or omission by the Lender or its successors or assigns, other than through disclosure by Guarantor or by any other Person in violation of this Paragraph (iv) or  any other confidentiality arrangement and the Lender, or its successors or assigns, has knowledge of suc h violation; provided, however, that in the event the disclosing Person shall reasonably endeavor to notify Guarantor thereof as soon as possible after such disclosure has been made and Guarantor shall be afford an opportunity to seek protective orders, or such other confidential treatment of such Information as Guarantor may deem reasonable.  

(v)

Certification.  All certifications required to be delivered pursuant to this Section 8(b) shall run directly to and be for the benefit of Lender and Fannie Mae.

(c)

Maintain Licenses.  Guarantor shall procure and maintain in full force and effect all licenses, Permits, charters and registrations which are material to the conduct of its business and shall abide by and satisfy all terms and conditions of all such licenses, Permits, charters and registrations.

(d)

Access to Records; Discussions With Senior Management.  To the extent permitted by law, Guarantor shall permit the Lender to:

(i)

inspect Guarantor’s books and records related to the Borrower and the Mortgaged Property;

(ii)

discuss Guarantor’s affairs, finances and accounts with Guarantor’s Senior Management or, provided that Senior Management of Guarantor has been given the opportunity by Lender to be a party to such discussions, property managers and independent public accountants;

(iii)

provided that Senior Management of Guarantor has been given the opportunity by Lender to be a party to such discussions, discuss the Mortgaged Properties’ conditions, operations or maintenance with the managers of such Mortgaged Properties and the officers and employees of Guarantor; and

(iv)

receive any other information that the Lender deems reasonably necessary or relevant in connection with the Guaranty, any Loan Document or the Guaranteed Obligations.

Notwithstanding the foregoing, prior to an Event of Default or Potential Event of Default, all inspections shall be conducted at reasonable times during normal business hours and upon reasonable notice to the Guarantor.

(e)

Inform the Lender of Material Events.  Guarantor shall promptly, but in any event within five (5) Business Days, inform the Lender in writing of any of the following (and shall deliver to the Lender copies of any related written communications, complaints, orders, judgments and other documents relating to the following) of which Guarantor has actual knowledge:

9

(i)

Defaults.  The occurrence of any Event of Default or any Potential Event of Default under any Loan Document;

(ii)

Bankruptcy Proceedings.  The commencement of any proceedings by or against Guarantor under any applicable bankruptcy, reorganization, liquidation, insolvency or other similar law now or hereafter in effect or of any proceeding in which a receiver, liquidator, trustee or other similar official is sought to be appointed for it;

(iii)

Accounting Changes.  Any material change in Guarantor’s accounting policies or financial reporting practices; and

(iv)

Restructuring of Guarantor.  Any restructuring or reorganization of any Guarantor.

(f)

ERISA.  Guarantor shall at all times remain in compliance in all material respects with all applicable provisions of ERISA and similar requirements of the PBGC.

(g)

Further Assurances.  Provided they do not materially increase the Guaranteed Obligations of Guarantor, Guarantor, at the request of the Lender, but without incurring any liability beyond the Guaranteed Obligations, shall execute and deliver and, if necessary, file or record such statements, documents, agreements, UCC financing and continuation statements and such other instruments and take such further action as the Lender from time to time may request as reasonably necessary, desirable or proper to carry out more effectively the purposes of this Guaranty or any of the other Loan Documents or to subject the Collateral to the lien and security interests of the Loan Documents or to evidence, perfect or otherwise implement, to assure the lien and security interests intended by the terms of the Loan Documents or in order to exercise or enforce its rights under the Loan Documents.

(h)

Monitoring Compliance.  Upon the request of the Lender, but without incurring any liability beyond the Guaranteed Obligations, from time to time, Guarantor shall promptly provide to the Lender such documents, certificates and other information as may be deemed reasonably necessary to enable the Lender to perform its functions under the Servicing Agreement as the same relates to the Guarantor.

Section 9.

Negative Covenants of Guarantor.

(a) Liquidation. Guarantor shall not dissolve or liquidate in whole or in part.

(b) Principal Place of Business. Guarantor shall not change its principal place of business or the location of its books and records without first giving 10 days' prior written notice to the Lender.

Section 10. Financial Covenants. Guarantor agrees and covenants with the Lender that, at all times during the Term of this Guaranty, the Net Worth of the REIT, the Guarantor and the Subsidiaries on a consolidated basis shall not be below $1,500,000,000.

Section 11.

Expenses.  Guarantor agrees to pay all reasonable costs and out-of-pocket expenses, including court costs and expenses and the reasonable fees and disbursements of legal counsel, incurred by or on behalf of Lender in connection with the enforcement of Guarantor’s obligations under this Guaranty or the protection of Lender’s rights under this Guaranty. The covenants contained in this Section shall survive the payment of the Guaranteed Obligations.

Section 12.

Condition of Borrower.  Guarantor is fully aware of the financial condition of Borrower and is executing and delivering this Guaranty based solely upon

10

Guarantor’s own independent investigation of all matters pertinent hereto and is not relying in any manner upon any representation or statement made by Lender. Guarantor represents and warrants that Guarantor is in a position to obtain, and Guarantor hereby assumes full responsibility for obtaining, any additional information concerning Borrower’s financial condition and any other matters pertinent hereto as Guarantor may desire and Guarantor is not relying upon or expecting Lender to furnish to Guarantor any information now or hereafter in Lender’s possession concerning the same or any other matter. By executing this Guaranty, Guarantor knowingly accepts the full range of risks encompassed within a contract of this type, which risks Guarantor acknowledges.

Section 13.

Further Assurances.  Guarantor agrees at any time and from time to time upon request by Lender to take, or cause to be taken, any action and to execute and deliver any additional documents which, in the reasonable opinion of Lender, may be necessary in order to assure to Lender the full benefits of this Guaranty, so long as any such action does not materially increase Guarantor’s Guaranteed Obligations hereunder or materially decrease its rights hereunder.

Section 14.

Subordination.  Guarantor hereby irrevocably and unconditionally agrees that any claims, direct or indirect, Guarantor may have by subrogation or other form of reimbursement, against Borrower or to any security or any interest therein, by virtue of this Guaranty or as a consequence of any payment made by Guarantor pursuant to this Guaranty, shall be fully subordinated in time and right of payment to the payment in full of the Guaranteed Obligations and all other obligations of Guarantor to Lender under this Guaranty.

Section 15.

No Subrogation.  Guarantor shall not have any right of subrogation against Borrower by reason of any payment by Guarantor under this Guaranty until such time as all of the Guaranteed Obligations have been satisfied in full. Nothing in the foregoing shall affect any claim which any Guarantor has against Borrower under the terms of the Organizational Documents of the Borrower.

Section 16.

Insolvency and Liability of Borrower.  So long as any of the Guaranteed Obligations is unpaid and this Guaranty is in effect, and to the extent not prohibited by the applicable bankruptcy court, Guarantor agrees to file all claims against Borrower in any bankruptcy or other proceeding in which the filing of claims is required by law in connection with indebtedness owed by Borrower to Guarantor and to assign to Lender all rights of Guarantor thereunder up to the lesser of (i) the amount of such indebtedness or (ii) the amount of the Guaranteed Obligations.  In all such cases the Person or Persons authorized to pay such claims shall pay to Lender the full amount thereof to the full extent necessary to pay the Guaranteed Obligations, and Guarantor hereby assigns to Lender all of Guarantor’s rights to all such payments to which Guarantor would otherwise be entitled. Notw ithstanding the foregoing, and except to the extent that any sums owed by Borrower to Lender under the Loan Documents shall have been fully satisfied thereby, the liability of Guarantor hereunder shall in no way be affected by

(a)

the release or discharge of Borrower in any creditors’, receivership, bankruptcy or other proceedings; or

(b)

the impairment, limitation or modification of the liability of Borrower or the estate of Borrower in bankruptcy resulting from the operation of any present or future provisions of the Bankruptcy Code or other statute or from the decision in any court.

Section 17.

Preferences, Fraudulent Conveyances, Etc.  If Lender is required to refund, or voluntarily refunds, any payment received from Borrower because such payment is or may be avoided, invalidated, declared fraudulent, set aside or determined to be void or voidable as a preference, fraudulent conveyance, impermissible setoff or a diversion of trust funds under

11

the bankruptcy laws or for any similar reason, including, without limitation, any judgment, order or decree of any court or administrative body having jurisdiction over Lender or any of its property, or any settlement or compromise of any claim effected by Lender with Borrower or other claimant (a “Rescinded Payment”), then Guarantor’s liability to Lender shall continue in full force and effect, or Guarantor’s liability to Lender shall be reinstated, as the case may be, with the same effect and to the same extent as if the Rescinded Payment had not been received by Lender (but only to the extent such Rescinded Payment was part of the Guaranteed Obligations hereunder), notwithstanding the cancellation or termination of any Note or any of the other Loan Documents. In addition, Guarantor shall pay, or reimburse Lender for, all expenses (including all reasona ble attorneys’ fees, court costs and related disbursements) incurred by Lender in the defense of any claim that a payment received by Lender in respect of all or any part of the Guaranteed Obligations from Guarantor must be refunded. The provisions of this Section shall survive the termination of this Guaranty and any satisfaction and discharge of Borrower by virtue of any payment, court order or any federal or state law.

Section 18.

Waiver.  Neither this Guaranty nor any term hereof may be changed, waived, discharged or terminated except by an instrument in writing signed by Lender and Guarantor expressly referring to this Guaranty and to the provisions so changed or limited. No such waiver shall extend to or affect any obligation not expressly waived or impair any right consequent thereon. No course of dealing or delay or omission on the part of Lender in exercising any right under this Guaranty shall operate as a waiver thereof or otherwise by prejudice thereto.

Section 19.

Notices.  All notices or other communications hereunder shall be sufficiently given and shall be deemed given when sent in the manner prescribed by the Loan Agreement addressed to the parties as follows:

As to the Guarantor:

AIMCO

Stanford Place 3

4582 South Ulster St. Parkway

Suite 1100

Denver, Colorado  80237

Attn:  Senior Vice President-Debt & Securities

with a copy to:

Ballard Spahr Andrews & Ingersoll, LLP

Seventeenth Street Plaza Building

1225 17^th Street, Suite 2300

Denver, Colorado 80202

Attn:  Gwendolyn C. Allen, Esquire

If to Lender or Fannie Mae:

As provided in the Loan Agreement.

Section 20.

Assignability by Lender.  Lender may, without notice to Guarantor, assign or transfer the Loans and the Loan Documents, in whole or in part. In such event, each and every immediate and successive assignee, transferee or holder of all or any part of the Loans and the Loan Documents shall have the right to enforce this Guaranty, by legal action or otherwise, as fully as if such assignee, transferee, or holder were by name specifically given such right and power in this Guaranty. Lender shall have an unimpaired right to enforce this Guaranty for its benefit as to so much of the Loans and the Loan Documents as Lender has not sold, assigned or transferred.

12

Section 21.

Guarantor Bound by Judgment Against Borrower.  Guarantor shall be conclusively bound, in any jurisdiction, by the judgment in any action by Lender against Borrower in connection with the Loan Documents (wherever instituted) as if Guarantor were a party to such action even if not so joined as a party.

Section 22.

Governing Law.  The provisions of Section 11.06 of the Loan Agreement (entitled Choice of Law; Consent to Jurisdiction; Waiver of Jury Trial) are hereby incorporated into this Agreement by this reference to the fullest extent as if the text of such Section were set forth in its entirety herein.

Section 23.

Invalid Provisions.  If any provision of this Guaranty or the application thereof to Guarantor or any circumstance in any jurisdiction whose laws govern this Guaranty shall, to any extent, be invalid or unenforceable under any applicable statute, regulation or rule of law, then such provision shall be deemed inoperative to the extent of such invalidity or unenforceability and shall be deemed modified to conform to such statute, regulation or rule or law. The remainder of this Guaranty and the application of any such invalid or unenforceable provision to parties, jurisdictions or circumstances other than those to whom or to which it is held invalid or unenforceable, shall not be affected by such invalidity or unenforceability nor shall such invalidity or unenforceability affect the validity or enforceability of any other provision of this Guaranty.

Section 24.

General Provisions.  This Guaranty shall be binding upon the respective successors and assigns of Guarantor, and shall inure to the benefit of Lender and its successors and assigns, including, without limitation, each successive holder of the Note. The descriptive headings of the Sections of the Guaranty have been inserted herein for convenience of reference only and shall not define or limit the provisions hereof.

ATTACHED EXHIBITS.  The following Exhibits are attached to this Instrument:

X Exhibit A Modifications to Guaranty

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]

13

IN WITNESS WHEREOF, Guarantor has signed this Guaranty under seal as of the day and year first above written.

AIMCO PROPERTIES, L.P., a Delaware limited partnership

By:  AIMCO-GP, Inc., a Delaware corporation, its general partner

By:

/s/Patti K. Fielding

Patti K. Fielding

Executive Vice President and Treasurer

14

EXHIBIT A

MODIFICATIONS TO GUARANTY

The following modifications are hereby made to the text of the Guaranty that precedes this Exhibit:

1.

A new Section 25 is hereby added as follows:

“Section 25.

Additional Guaranty Relating to Bankruptcy.  

(a)

Notwithstanding any limitation on liability provided for elsewhere in this Guaranty, Guarantor hereby absolutely, unconditionally and irrevocably guarantees to Lender the full and prompt payment when due, whether at the maturity date or earlier, by reason of acceleration or otherwise, and at all times thereafter, the entire Indebtedness, in the event that:

(i)

Borrower voluntarily files for bankruptcy protection under the United States Bankruptcy Code; or

(ii)

Borrower voluntarily becomes subject to any reorganization, receivership, insolvency proceeding, or other similar proceeding pursuant to any other federal or state law affecting debtor and creditor rights; or

(iii)

an order of relief is entered against Borrower pursuant to the United States Bankruptcy Code or other federal or state law affecting debtor and creditor rights in any involuntary bankruptcy proceeding initiated or joined in by a "Related Party."  

(b)

For purposes of this Section, the term "Related Party" means:

(i)

Borrower or Guarantor; and

(ii)

any person or entity that holds, directly or indirectly, any ownership interest in or right to manage Borrower or Guarantor, including without limitation, any shareholder, member or partner of Borrower or Guarantor; and

(iii)

any person or entity in which any ownership interest (direct or indirect) or right to manage is held by Borrower, Guarantor or any partner, shareholder or member of, or any other person or entity holding an interest in, Borrower or Guarantor; and

(iv)

any other creditor of Borrower that is related by blood, marriage or adoption to Borrower, Guarantor or any partner, shareholder or member of, or any

PAGE A-1

other person or entity holding an interest in, Borrower or Guarantor.  

If Borrower, Guarantor or any Related Party has solicited creditors to initiate or participate in any proceeding referred to in this Section, regardless of whether any of the creditors solicited actually initiates or participates in the proceeding, then such proceeding shall be considered as having been initiated by a Related Party.”

_____________

INITIALS

PAGE A-2

EX-10

EXHIBIT 10.58

MULTIFAMILY MORTGAGE,

ASSIGNMENT OF RENTS

AND SECURITY AGREEMENT

This Instrument was prepared by,

and after recording return to:

Brian J. Iwashyna, Esquire

Troutman Sanders LLP

P.O. Box 1122

Richmond, Virginia  23218-1122

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TABLE OF CONTENTS

Page

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Watergate Apartments

MULTIFAMILY MORTGAGE,

ASSIGNMENT OF RENTS

AND SECURITY AGREEMENT

THIS MULTIFAMILY MORTGAGE, ASSIGNMENT OF RENTS AND SECURITY AGREEMENT (the “Instrument”) is dated as of the 18th day of January, 2007, between VMS NATIONAL PROPERTIES, a joint venture general partnership organized and existing under the laws of Illinois, whose address is c/o AIMCO, Stanford Place 3, 4582 South Ulster Street Parkway, Suite 1100, Denver, Colorado 80237, as mortgagor (“Borrower”), and CAPMARK FINANCE INC., a corporation organized and existing under the laws of California, whose address is 116 Welsh Road, Horsham, Pennsylvania 19044, Attn: Servicing-Executive Vice President, as mortgagee (“Lender”).

Borrower is indebted to Lender in the principal amount of $4,402,999.00, as evidenced by Borrower’s Multifamily Note payable to Lender dated as of the date of this Instrument, and maturing as set forth in the Loan Agreement.

TO SECURE TO LENDER the repayment of the Indebtedness, and all renewals, extensions and modifications of the Indebtedness, and the performance of the covenants and agreements of Borrower contained in the Loan Documents, Borrower mortgages, warrants, grants, bargains, sells, conveys and assigns to Lender and Lender's successors and assigns forever, with power of sale, the Mortgaged Property, including the Land located in the County of Pulaski, State of Arkansas, and described in Exhibit A attached to this Instrument.

Borrower represents and warrants that Borrower is lawfully seized of the Mortgaged Property and has the right, power and authority to mortgage, grant, convey and assign the Mortgaged Property, and that the Mortgaged Property is unencumbered.  Borrower covenants that Borrower will warrant and defend generally the title to the Mortgaged Property against all claims and demands, subject to any easements and restrictions listed in a schedule of exceptions to coverage in any title insurance policy issued to Lender contemporaneously with the execution and recordation of this Instrument and insuring Lender's interest in the Mortgaged Property.

Covenants.  Borrower and Lender covenant and agree as follows:

1.

DEFINITIONS.  The following terms, when used in this Instrument (including when used in the above recitals), shall have the following meanings:

(a)

"Borrower" means all persons or entities identified as "Borrower" in the first paragraph of this Instrument, together with their successors and assigns.

(b)

"Collateral Agreement" means any separate agreement between Borrower and Lender for the purpose of establishing replacement reserves for the Mortgaged Property, establishing a fund to assure completion of repairs or improvements specified in that agreement, or assuring reduction of the outstanding principal balance of the Indebtedness if the occupancy of or

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income from the Mortgaged Property does not increase to a level specified in that agreement, or any other agreement or agreements between Borrower and Lender which provide for the establishment of any other fund, reserve or account.

(c)

"Environmental Permit" means any permit, license, or other authorization issued under any Hazardous Materials Law with respect to any activities or businesses conducted on or in relation to the Mortgaged Property.

(d)

"Event of Default" means the occurrence of any event listed in Section 22.

(e)

"Fixtures" means all property which is so attached to the Land or the Improvements as to constitute a fixture under applicable law, including: machinery, equipment, engines, boilers, incinerators, installed building materials; systems and equipment for the purpose of supplying or distributing heating, cooling, electricity, gas, water, air, or light; antennas, cable, wiring and conduits used in connection with radio, television, security, fire prevention, or fire detection or otherwise used to carry electronic signals; telephone systems and equipment; elevators and related machinery and equipment; fire detection, prevention and extinguishing systems and apparatus; security and access control systems and apparatus; plumbing systems; water heaters, ranges, stoves, microwave ovens, refrigerators, dishwashers, garbage disposers, washers, dryers and other appliances; light fixtures, aw nings, storm windows and storm doors; pictures, screens, blinds, shades, curtains and curtain rods; mirrors; cabinets, paneling, rugs and floor and wall coverings; fences, trees and plants; swimming pools; and exercise equipment.

(f)

"Governmental Authority" means any board, commission, department or body of any municipal, county, state or federal governmental unit, or any subdivision of any of them, that has or acquires jurisdiction over the Mortgaged Property or the use, operation or improvement of the Mortgaged Property.

(g)

"Hazardous Materials" means petroleum and petroleum products and compounds containing them, including gasoline, diesel fuel and oil; explosives; flammable materials; radioactive materials; polychlorinated biphenyls ("PCBs") and compounds containing them; lead and lead-based paint; asbestos or asbestos-containing materials in any form that is or could become friable; underground or above-ground storage tanks, whether empty or containing any substance; any substance the presence of which on the Mortgaged Property is prohibited by any federal, state or local authority; any substance that requires special handling; and any other material or substance now or in the future defined as a "hazardous substance," "hazardous material," "hazardous waste," "toxic substance," "toxic pollutant," "contaminant," or "polluta nt" within the meaning of any Hazardous Materials Law.

(h)

"Hazardous Materials Laws" means all federal, state, and local laws, ordinances and regulations and standards, rules, policies and other governmental requirements, administrative rulings and court judgments and decrees in effect now or in the future and including all amendments, that relate to Hazardous Materials and apply to Borrower or to the Mortgaged Property. Hazardous Materials Laws include, but are not limited to, the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., the Toxic Substance

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Control Act, 15 U.S.C. Section 2601, et seq., the Clean Water Act, 33 U.S.C. Section 1251, et seq., and the Hazardous Materials Transportation Act, 49 U.S.C. Section 5101, and their state analogs.

(i)

"Impositions" and "Imposition Deposits" are defined in Section 7(a).

(j)

"Improvements" means the buildings, structures, improvements, and alterations now constructed or at any time in the future constructed or placed upon the Land, including any future replacements and additions.

(k)

"Indebtedness" means the principal of, interest on, and all other amounts due at any time under, the Note, this Instrument or any other Loan Document, including prepayment premiums, late charges, default interest, and advances as provided in Section 12 to protect the security of this Instrument.

(l)

 [Intentionally omitted]

(m)

"Key Principal" means the natural person(s) or entity identified as such at the foot of this Instrument, and any person or entity who becomes a Key Principal after the date of this Instrument and is identified as such in an amendment or supplement to this Instrument.

(n)

"Land" means the land described in Exhibit A.

(o)

"Leases" means all present and future leases, subleases, licenses, concessions or grants or other possessory interests now or hereafter in force, whether oral or written, covering or affecting the Mortgaged Property, or any portion of the Mortgaged Property (including proprietary leases or occupancy agreements if Borrower is a cooperative housing corporation), and all modifications, extensions or renewals.

(p)

"Lender" means the entity identified as "Lender" in the first paragraph of this Instrument and its successors and assigns, or any subsequent holder of the Note.

(q)

"Loan Documents" means the Note, this Instrument, all guaranties, all indemnity agreements, all Collateral Agreements, O&M Programs, and any other documents now or in the future executed by Borrower, Key Principal, any guarantor or any other person in connection with the loan evidenced by the Note, as such documents may be amended from time to time.

(r)

"Loan Servicer" means the entity that from time to time is designated by Lender to collect payments and deposits and receive notices under the Note, this Instrument and any other Loan Document, and otherwise to service the loan evidenced by the Note for the benefit of Lender.  Unless Borrower receives notice to the contrary, the Loan Servicer is the entity identified as "Lender" in the first paragraph of this Instrument.

(s)

"Mortgaged Property" means all of Borrower's present and future right, title and interest in and to all of the following:

(1)

the Land;

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(2)

the Improvements;

(3)

the Fixtures;

(4)

the Personalty;

(5)

all current and future rights, including air rights, development rights, zoning rights and other similar rights or interests, easements, tenements, rights-of-way, strips and gores of land, streets, alleys, roads, sewer rights, waters, watercourses, and appurtenances related to or benefiting the Land or the Improvements, or both, and all rights-of-way, streets, alleys and roads which may have been or may in the future be vacated;

(6)

all proceeds paid or to be paid by any insurer of the Land, the Improvements, the Fixtures, the Personalty or any other part of the Mortgaged Property, whether or not Borrower obtained the insurance pursuant to Lender’s requirement;

(7)

all awards, payments and other compensation made or to be made by any municipal, state or federal authority with respect to the Land, the Improvements, the Fixtures, the Personalty or any other part of the Mortgaged Property, including any awards or settlements resulting from condemnation proceedings or the total or partial taking of the Land, the Improvements, the Fixtures, the Personalty or any other part of the Mortgaged Property under the power of eminent domain or otherwise and including any conveyance in lieu thereof;

(8)

all contracts, options and other agreements for the sale of the Land, the Improvements, the Fixtures, the Personalty or any other part of the Mortgaged Property entered into by Borrower now or in the future, including cash or securities deposited to secure performance by parties of their obligations;

(9)

all proceeds from the conversion, voluntary or involuntary, of any of the above into cash or liquidated claims, and the right to collect such proceeds;

(10)

all Rents and Leases;

(11)

all earnings, royalties, accounts receivable, issues and profits from the Land, the Improvements or any other part of the Mortgaged Property, and all undisbursed proceeds of the loan secured by this Instrument and, if Borrower is a cooperative housing corporation, maintenance charges or assessments payable by shareholders or residents;

(12)

all Imposition Deposits;

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(13)

all refunds or rebates of Impositions by any municipal, state or federal authority or insurance company (other than refunds applicable to periods before the real property tax year in which this Instrument is dated);

(14)

all tenant security deposits which have not been forfeited by any tenant under any Lease; and

(15)

all names under or by which any of the above Mortgaged Property may be operated or known, and all trademarks, trade names, and goodwill relating to any of the Mortgaged Property.

(t)

"Note" means the Multifamily Note described on page 1 of this Instrument, including the Acknowledgment and Agreement of Key Principal to Personal Liability for Exceptions to Non-Recourse Liability (if any), and all schedules, riders, allonges and addenda, as such Multifamily Note may be amended from time to time.

(u)

"O&M Program" is defined in Section 18(a).

(v)

"Personalty" means all equipment, inventory, general intangibles which are used now or in the future in connection with the ownership, management or operation of the Land or the Improvements or are located on the Land or in the Improvements, including furniture, furnishings, machinery, building materials, appliances, goods, supplies, tools, books, records (whether in written or electronic form), computer equipment (hardware and software) and other tangible personal property (other than Fixtures) which are used now or in the future in connection with the ownership, management or operation of the Land or the Improvements or are located on the Land or in the Improvements, and any operating agreements relating to the Land or the Improvements, and any surveys, plans and specifications and contracts for architectural, engineering and construction services relating to the Land or the Im provements and all other intangible property and rights relating to the operation of, or used in connection with, the Land or the Improvements, including all governmental permits relating to any activities on the Land.

(w)

"Property Jurisdiction" is defined in Section 30(a).

(x)

"Rents" means all rents (whether from residential or non-residential space), revenues and other income of the Land or the Improvements, including subsidy payments received from any sources (including, but not limited to payments under any Housing Assistance Payments Contract) parking fees, laundry and vending machine income and fees and charges for food, health care and other services provided at the Mortgaged Property, whether now due, past due, or to become due, and deposits forfeited by tenants.

(y)

"Taxes" means all taxes, assessments, vault rentals and other charges, if any, general, special or otherwise, including all assessments for schools, public betterments and general or local improvements, which are levied, assessed or imposed by any public authority or quasi-public authority, and which, if not paid, will become a lien, on the Land or the Improvements.

(z)

"Transfer" means (A) a sale, assignment, transfer or other disposition (whether voluntary, involuntary or by operation of law); (B) the granting, creating or attachment of a lien,

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encumbrance or security interest (whether voluntary, involuntary or by operation of law); (C) the issuance or other creation of an ownership interest in a legal entity, including a partnership interest, interest in a limited liability company or corporate stock; (D) the withdrawal, retirement, removal or involuntary resignation of a partner in a partnership or a member or manager in a limited liability company; or (E) the merger, dissolution, liquidation, or consolidation of a legal entity.  "Transfer" does not include (i) a conveyance of the Mortgaged Property at a judicial or non-judicial foreclosure sale under this Instrument or (ii) the Mortgaged Property becoming part of a bankruptcy estate by operation of law under the United States Bankruptcy Code.  For purposes of defining the term "Transfer," the term "partnership&qu ot; shall mean a general partnership, a limited partnership, a joint venture and a limited liability partnership, and the term "partner" shall mean a general partner, a limited partner and a joint venturer.

2.

UNIFORM COMMERCIAL CODE SECURITY AGREEMENT.  This Instrument is also a security agreement under the Uniform Commercial Code for any of the Mortgaged Property which, under applicable law, may be subject to a security interest under the Uniform Commercial Code, whether acquired now or in the future, and all products and cash and non-cash proceeds thereof (collectively, "UCC Collateral"), and Borrower hereby grants to Lender a security interest in the UCC Collateral.  Borrower hereby authorizes Lender to file financing statements, continuation statements and financing statement amendments, in such form as Lender may require to perfect or continue the perfection of this security interest and Borrower agrees, if Lender so requests, to execute and deliver to Lender such financing statements, continuation statements and amendments.  Borr ower shall pay all filing costs and all costs and expenses of any record searches for financing statements that Lender may require.  Without the prior written consent of Lender, Borrower shall not create or permit to exist any other lien or security interest in any of the UCC Collateral.  If an Event of Default has occurred and is continuing, Lender shall have the remedies of a secured party under the Uniform Commercial Code, in addition to all remedies provided by this Instrument or existing under applicable law.  In exercising any remedies, Lender may exercise its remedies against the UCC Collateral separately or together, and in any order, without in any way affecting the availability of Lender's other remedies.  This Instrument constitutes a financing statement with respect to any part of the Mortgaged Property which is or may become a Fixture.

3.

ASSIGNMENT OF RENTS; APPOINTMENT OF RECEIVER; LENDER IN POSSESSION.

(a)

As part of the consideration for the Indebtedness, Borrower absolutely and unconditionally assigns and transfers to Lender all Rents. It is the intention of Borrower to establish a present, absolute and irrevocable transfer and assignment to Lender of all Rents and to authorize and empower Lender to collect and receive all Rents without the necessity of further action on the part of Borrower.  Promptly upon request by Lender, Borrower agrees to execute and deliver such further assignments as Lender may from time to time require.  Borrower and Lender intend this assignment of Rents to be immediately effective and to constitute an absolute present assignment and not an assignment for additional security only.  For purposes of giving effect to this absolute assignment of Rents, and for no other purpose, Rents shall not be deemed to be a part of the "Mortgaged Property," as t hat term is defined in Section 1(s).  However, if this present, absolute and unconditional assignment of Rents is not enforceable by its terms under the laws of the Property Jurisdiction, then the Rents shall be included as a part of the Mortgaged Property and it is the

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intention of the Borrower that in this circumstance this Instrument create and perfect a lien on Rents in favor of Lender, which lien shall be effective as of the date of this Instrument.

(b)

After the occurrence of an Event of Default, Borrower authorizes Lender to collect, sue for and compromise Rents and directs each tenant of the Mortgaged Property to pay all Rents to, or as directed by, Lender, and Borrower shall, upon Borrower’s receipt of any Rents from any sources (including, but not limited to subsidy payments under any Housing Assistance Payments Contract), pay the total amount of such receipts to the Lender.  However, until the occurrence of an Event of Default, Lender hereby grants to Borrower a revocable license to collect and receive all Rents, to hold all Rents in trust for the benefit of Lender and to apply all Rents to pay the installments of interest and principal then due and payable under the Note and the other amounts then due and payable under the other Loan Documents, including Imposition Deposits, and to pay the current costs and expenses of managing, operating and maintaining the Mortgaged Property, including utilities, Taxes and insurance premiums (to the extent not included in Imposition Deposits), tenant improvements and other capital expenditures.  So long as no Event of Default has occurred and is continuing, the Rents remaining after application pursuant to the preceding sentence may be retained by Borrower free and clear of, and released from, Lender's rights with respect to Rents under this Instrument.  From and after the occurrence of an Event of Default, and without the necessity of Lender entering upon and taking and maintaining control of the Mortgaged Property directly, or by a receiver, Borrower’s license to collect Rents shall automatically terminate and Lender shall without notice be entitled to all Rents as they become due and payable, including Rents then due and unpaid.  Borrower shall pay to Lender upon demand all Rents to which Lender is entitled.  At any time on or after the date of Lender’s demand for Rents, Lender may give, and Borrower hereby irrevocably authorizes Lender to give, notice to all tenants of the Mortgaged Property instructing them to pay all Rents to Lender, no tenant shall be obligated to inquire further as to the occurrence or continuance of an Event of Default, and no tenant shall be obligated to pay to Borrower any amounts which are actually paid to Lender in response to such a notice.  Any such notice by Lender shall be delivered to each tenant personally, by mail or by delivering such demand to each rental unit.  Borrower shall not interfere with and shall cooperate with Lender's collection of such Rents.

(c)

Borrower represents and warrants to Lender that Borrower has not executed any prior assignment of Rents (other than an assignment of Rents securing indebtedness that will be paid off and discharged with the proceeds of the loan evidenced by the Note), that Borrower has not performed, and Borrower covenants and agrees that it will not perform, any acts and has not executed, and shall not execute, any instrument which would prevent Lender from exercising its rights under this Section 3, and that at the time of execution of this Instrument there has been no anticipation or prepayment of any Rents for more than two months prior to the due dates of such Rents.  Borrower shall not collect or accept payment of any Rents more than two months prior to the due dates of such Rents.

(d)

If an Event of Default has occurred and is continuing, Lender may, regardless of the adequacy of Lender's security or the solvency of Borrower and even in the absence of waste, enter upon and take and maintain full control of the Mortgaged Property in order to perform all acts that Lender in its discretion determines to be necessary or desirable for the operation and maintenance of the Mortgaged Property, including the execution, cancellation or modification of Leases, the collection of all Rents, the making of repairs to the Mortgaged Property and the execution or termination of contracts providing for the management, operation or maintenance of the Mortgaged

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Property, for the purposes of enforcing the assignment of Rents pursuant to Section 3(a), protecting the Mortgaged Property or the security of this Instrument, or for such other purposes as Lender in its discretion may deem necessary or desirable.  Alternatively, if an Event of Default has occurred and is continuing, regardless of the adequacy of Lender's security, without regard to Borrower’s solvency and without the necessity of giving prior notice (oral or written) to Borrower, Lender may apply to any court having jurisdiction for the appointment of a receiver for the Mortgaged Property to take any or all of the actions set forth in the preceding sentence.  If Lender elects to seek the appointment of a receiver for the Mortgaged Property at any time after an Event of Default has occurred and is continuing, Borrower, by its execution of this I nstrument, expressly consents to the appointment of such receiver, including the appointment of a receiver ex parte if permitted by applicable law.  Lender or the receiver, as the case may be, shall be entitled to receive a reasonable fee for managing the Mortgaged Property.  Immediately upon appointment of a receiver or immediately upon the Lender's entering upon and taking possession and control of the Mortgaged Property, Borrower shall surrender possession of the Mortgaged Property to Lender or the receiver, as the case may be, and shall deliver to Lender or the receiver, as the case may be, all documents, records (including records on electronic or magnetic media), accounts, surveys, plans, and specifications relating to the Mortgaged Property and all security deposits and prepaid Rents.  In the event Lender takes possession and control of the Mortgaged Property, Lender may exclude Borrower and its representatives from the Mortgaged Property.  Borrower acknowledges and a grees that the exercise by Lender of any of the rights conferred under this Section 3 shall not be construed to make Lender a mortgagee-in-possession of the Mortgaged Property so long as Lender has not itself entered into actual possession of the Land and Improvements.

(e)

If Lender enters the Mortgaged Property, Lender shall be liable to account only to Borrower and only for those Rents actually received.  Lender shall not be liable to Borrower, anyone claiming under or through Borrower or anyone having an interest in the Mortgaged Property, by reason of any act or omission of Lender under this Section 3, and Borrower hereby releases and discharges Lender from any such liability to the fullest extent permitted by law.

(f)

If the Rents are not sufficient to meet the costs of taking control of and managing the Mortgaged Property and collecting the Rents, any funds expended by Lender for such purposes shall become an additional part of the Indebtedness as provided in Section 12.

(g)

Any entering upon and taking of control of the Mortgaged Property by Lender or the receiver, as the case may be, and any application of Rents as provided in this Instrument shall not cure or waive any Event of Default or invalidate any other right or remedy of Lender under applicable law or provided for in this Instrument.

4.

ASSIGNMENT OF LEASES; LEASES AFFECTING THE MORTGAGED PROPERTY.

(a)

As part of the consideration for the Indebtedness, Borrower absolutely and unconditionally assigns and transfers to Lender all of Borrower's right, title and interest in, to and under the Leases, including Borrower's right, power and authority to modify the terms of any such Lease, or extend or terminate any such Lease.   It is the intention of Borrower to establish a present, absolute and irrevocable transfer and assignment to Lender of all of Borrower's right, title and interest in, to and under the Leases.  Borrower and Lender intend this assignment of the Leases to be immediately effective and to constitute an absolute present assignment and not an assignment for

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additional security only.  For purposes of giving effect to this absolute assignment of the Leases, and for no other purpose, the Leases shall not be deemed to be a part of the "Mortgaged Property," as that term is defined in Section 1(s).  However, if this present, absolute and unconditional assignment of the Leases is not enforceable by its terms under the laws of the Property Jurisdiction, then the Leases shall be included as a part of the Mortgaged Property and it is the intention of the Borrower that in this circumstance this Instrument create and perfect a lien on the Leases in favor of Lender, which lien shall be effective as of the date of this Instrument.

(b)

Until Lender gives notice to Borrower of Lender's exercise of its rights under this Section 4, Borrower shall have all rights, power and authority granted to Borrower under any Lease (except as otherwise limited by this Section or any other provision of this Instrument), including the right, power and authority to modify the terms of any Lease or extend or terminate any Lease.  Upon the occurrence of an Event of Default, the permission given to Borrower pursuant to the preceding sentence to exercise all rights, power and authority under Leases shall automatically terminate.  Borrower shall comply with and observe Borrower's obligations under all Leases, including Borrower's obligations pertaining to the maintenance and disposition of tenant security deposits.

(c)

Borrower acknowledges and agrees that the exercise by Lender, either directly or by a receiver, of any of the rights conferred under this Section 4 shall not be construed to make Lender a mortgagee-in-possession of the Mortgaged Property so long as Lender has not itself entered into actual possession of the Land and the Improvements.  The acceptance by Lender of the assignment of the Leases pursuant to Section 4(a) shall not at any time or in any event obligate Lender to take any action under this Instrument or to expend any money or to incur any expenses.  Lender shall not be liable in any way for any injury or damage to person or property sustained by any person or persons, firm or corporation in or about the Mortgaged Property.  Prior to Lender's actual entry into and taking possession of the Mortgaged Property, Lender shall not (i) be obligated to perform any of the t erms, covenants and conditions contained in any Lease (or otherwise have any obligation with respect to any Lease); (ii) be obligated to appear in or defend any action or proceeding relating to the Lease or the Mortgaged Property; or (iii) be responsible for the operation, control, care, management or repair of the Mortgaged Property or any portion of the Mortgaged Property.  The execution of this Instrument by Borrower shall constitute conclusive evidence that all responsibility for the operation, control, care, management and repair of the Mortgaged Property is and shall be that of Borrower, prior to such actual entry and taking of possession.

(d)

Upon delivery of notice by Lender to Borrower of Lender's exercise of Lender's rights under this Section 4 at any time after the occurrence of an Event of Default, and without the necessity of Lender entering upon and taking and maintaining control of the Mortgaged Property directly, by a receiver, or by any other manner or proceeding permitted by the laws of the Property Jurisdiction, Lender immediately shall have all rights, powers and authority granted to Borrower under any Lease, including the right, power and authority to modify the terms of any such Lease, or extend or terminate any such Lease.

(e)

Borrower shall, promptly upon Lender's request, deliver to Lender an executed copy of each residential Lease then in effect. All Leases for residential dwelling units shall be on forms approved by Lender, shall be for initial terms of at least six months and not more than two years, and shall not include options to purchase.  If customary in the applicable market, residential Leases with terms of less than six months may be permitted with Lender's prior written consent.

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(f)

Borrower shall not lease any portion of the Mortgaged Property for non-residential use except with the prior written consent of Lender and Lender's prior written approval of the Lease agreement.  Borrower shall not modify the terms of, or extend or terminate, any Lease for non-residential use (including any Lease in existence on the date of this Instrument) without the prior written consent of Lender.  Borrower shall, without request by Lender, deliver an executed copy of each non-residential Lease to Lender promptly after such Lease is signed.  All non-residential Leases, including renewals or extensions of existing Leases, shall specifically provide that (1) such Leases are subordinate to the lien of this Instrument (unless waived in writing by Lender); (2) the tenant shall attorn to Lender and any purchaser at a foreclosure sale, such attornment to be self-executing and effectiv e upon acquisition of title to the Mortgaged Property by any purchaser at a foreclosure sale or by Lender in any manner; (3) the tenant agrees to execute such further evidences of attornment as Lender or any purchaser at a foreclosure sale may from time to time request; (4) the Lease shall not be terminated by foreclosure or any other transfer of the Mortgaged Property; (5) after a foreclosure sale of the Mortgaged Property, Lender or any other purchaser at such foreclosure sale may, at Lender's or such purchaser's option, accept or terminate such Lease; and (6) the tenant shall, upon receipt after the occurrence of an Event of Default of a written request from Lender, pay all Rents payable under the Lease to Lender.

(g)

Borrower shall not receive or accept Rent under any Lease (whether residential or non-residential) for more than two months in advance.

5.

PAYMENT OF INDEBTEDNESS; PERFORMANCE UNDER LOAN DOCUMENTS; PREPAYMENT PREMIUM.  Borrower shall pay the Indebtedness when due in accordance with the terms of the Note and the other Loan Documents and shall perform, observe and comply with all other provisions of the Note and the other Loan Documents.  Borrower shall pay a prepayment premium in connection with certain prepayments of the Indebtedness, including a payment made after Lender's exercise of any right of acceleration of the Indebtedness, as provided in the Note.

6.

EXCULPATION.  Borrower’s personal liability for payment of the Indebtedness and for performance of the other obligations to be performed by it under this Instrument is limited in the manner, and to the extent, provided in the Note.

7.

DEPOSITS FOR TAXES, INSURANCE AND OTHER CHARGES.

(a)

Borrower shall deposit with Lender on the day monthly installments of principal or interest, or both, are due under the Note (or on another day designated in writing by Lender), until the Indebtedness is paid in full, an additional amount sufficient to accumulate with Lender the entire sum required to pay, when due (1) any water and sewer charges which, if not paid, may result in a lien on all or any part of the Mortgaged Property, (2) the premiums for fire and other hazard insurance, rent loss insurance and such other insurance as Lender may require under Section 19, (3) Taxes, and (4) amounts for other charges and expenses which Lender at any time reasonably deems necessary to protect the Mortgaged Property, to prevent the imposition of liens on the Mortgaged Property, or otherwise to protect Lender's interests, all as reasonably estimated from time to time by Lender.  The amounts dep osited under the preceding sentence are collectively referred to in this Instrument as the "Imposition Deposits".  The obligations of Borrower for which the Imposition Deposits are required are collectively referred to in this Instrument as "Impositions".  The amount of the Imposition Deposits shall be sufficient to enable Lender to pay each Imposition before the last

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date upon which such payment may be made without any penalty or interest charge being added.  Lender shall maintain records indicating how much of the monthly Imposition Deposits and how much of the aggregate Imposition Deposits held by Lender are held for the purpose of paying Taxes, insurance premiums and each other obligation of Borrower for which Imposition Deposits are required.  Any waiver by Lender of the requirement that Borrower remit Imposition Deposits to Lender may be revoked by Lender, in Lender's discretion, at any time upon notice to Borrower.

(b)

Imposition Deposits shall be held in an institution (which may be Lender, if Lender is such an institution) whose deposits or accounts are insured or guaranteed by a federal agency.  Lender shall not be obligated to open additional accounts or deposit Imposition Deposits in additional institutions when the amount of the Imposition Deposits exceeds the maximum amount of the federal deposit insurance or guaranty.  Lender shall apply the Imposition Deposits to pay Impositions so long as no Event of Default has occurred and is continuing.  Unless applicable law requires, Lender shall not be required to pay Borrower any interest, earnings or profits on the Imposition Deposits.  Borrower hereby pledges and grants to Lender a security interest in the Imposition Deposits as additional security for all of Borrower's obligations under this Instrument and the other Loan Documents.   Any amounts deposited with Lender under this Section 7 shall not be trust funds, nor shall they operate to reduce the Indebtedness, unless applied by Lender for that purpose under Section 7(e).

(c)

If Lender receives a bill or invoice for an Imposition, Lender shall pay the Imposition from the Imposition Deposits held by Lender.  Lender shall have no obligation to pay any Imposition to the extent it exceeds Imposition Deposits then held by Lender.  Lender may pay an Imposition according to any bill, statement or estimate from the appropriate public office or insurance company without inquiring into the accuracy of the bill, statement or estimate or into the validity of the Imposition.

(d)

If at any time the amount of the Imposition Deposits held by Lender for payment of a specific Imposition exceeds the amount reasonably deemed necessary by Lender, the excess shall be credited against future installments of Imposition Deposits.  If at any time the amount of the Imposition Deposits held by Lender for payment of a specific Imposition is less than the amount reasonably estimated by Lender to be necessary, Borrower shall pay to Lender the amount of the deficiency within 15 days after notice from Lender.

(e)

If an Event of Default has occurred and is continuing, Lender may apply any Imposition Deposits, in any amounts and in any order as Lender determines, in Lender's discretion, to pay any Impositions or as a credit against the Indebtedness. Upon payment in full of the Indebtedness, Lender shall refund to Borrower any Imposition Deposits held by Lender.

8.

COLLATERAL AGREEMENTS.  Borrower shall deposit with Lender such amounts as may be required by any Collateral Agreement and shall perform all other obligations of Borrower under each Collateral Agreement.

9.

APPLICATION OF PAYMENTS.  If at any time Lender receives, from Borrower or otherwise, any amount applicable to the Indebtedness which is less than all amounts due and payable at such time, then Lender may apply that payment to amounts then due and payable in any manner and in any order determined by Lender, in Lender's discretion.  Neither Lender's acceptance

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of an amount which is less than all amounts then due and payable nor Lender's application of such payment in the manner authorized shall constitute or be deemed to constitute either a waiver of the unpaid amounts or an accord and satisfaction.  Notwithstanding the application of any such amount to the Indebtedness, Borrower’s obligations under this Instrument and the Note shall remain unchanged.

10.

COMPLIANCE WITH LAWS.  Borrower shall comply with all laws, ordinances, regulations and requirements of any Governmental Authority and all recorded lawful covenants and agreements relating to or affecting the Mortgaged Property, including all laws, ordinances, regulations, requirements and covenants pertaining to health and safety, construction of improvements on the Mortgaged Property, fair housing, zoning and land use, and Leases.  Borrower also shall comply with all applicable laws that pertain to the maintenance and disposition of tenant security deposits.  Borrower shall at all times maintain records sufficient to demonstrate  compliance with the provisions of this Section 10.  Borrower shall take appropriate measures to prevent, and shall not engage in or knowingly permit, any illegal activities at the Mortgaged Property that could endanger tenants or vi sitors, result in damage to the Mortgaged Property, result in forfeiture of the Mortgaged Property, or otherwise materially impair the lien created by this Instrument or Lender's interest in the Mortgaged Property.  Borrower represents and warrants to Lender that no portion of the Mortgaged Property has been or will be purchased with the proceeds of any illegal activity.

11.

USE OF PROPERTY.  Unless required by applicable law, Borrower shall not (a) except for any change in use approved by Lender, allow changes in the use for which all or any part of the Mortgaged Property is being used at the time this Instrument was executed, (b) convert any individual dwelling units or common areas to commercial use, (c) initiate or acquiesce in a change in the zoning classification of the Mortgaged Property, or (d) establish any condominium or cooperative regime with respect to the Mortgaged Property.

12.

PROTECTION OF LENDER'S SECURITY.

(a)

If Borrower fails to perform any of its obligations under this Instrument or any other Loan Document, or if any action or proceeding is commenced which purports to affect the Mortgaged Property, Lender's security or Lender's rights under this Instrument, including eminent domain, insolvency, code enforcement, civil or criminal forfeiture, enforcement of Hazardous Materials Laws, fraudulent conveyance or reorganizations or proceedings involving a bankrupt or decedent, then Lender at Lender's option may make such appearances, disburse such sums and take such actions as Lender reasonably deems necessary to perform such obligations of Borrower and to protect Lender's interest, including (1) payment of fees and out-of-pocket expenses of attorneys, accountants, inspectors and consultants, (2) entry upon the Mortgaged Property to make repairs or secure the Mortgaged Property, (3) procurement of the insu rance required by Section 19, and (4) payment of amounts which Borrower has failed to pay under Sections 15 and 17.

(b)

Any amounts disbursed by Lender under this Section 12, or under any other provision of this Instrument that treats such disbursement as being made under this Section 12, shall be added to, and become part of, the principal component of the Indebtedness, shall be immediately due and payable and shall bear interest from the date of disbursement until paid at the "Default Rate", as defined in the Note.

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(c)

Nothing in this Section 12 shall require Lender to incur any expense or take any action.

13.

INSPECTION.  Lender, its agents, representatives, and designees may make or cause to be made entries upon and inspections of the Mortgaged Property (including environmental inspections and tests) during normal business hours, or at any other reasonable time.

14.

BOOKS AND RECORDS; FINANCIAL REPORTING.

(a)

Borrower shall keep and maintain at all times at the Mortgaged Property or the management agent's offices, and upon Lender's request shall make available at the Mortgaged Property, complete and accurate books of account and records (including copies of supporting bills and invoices) adequate to reflect correctly the operation of the Mortgaged Property, and copies of all written contracts, Leases, and other instruments which affect the Mortgaged Property.  The books, records, contracts, Leases and other instruments shall be subject to examination and inspection at any reasonable time by Lender.

(b)

Borrower shall furnish to Lender all of the following:

(1)

within 120 days after the end of each fiscal year of Borrower, a statement of income and expenses for Borrower's operation of the Mortgaged Property for that fiscal year, a statement of changes in financial position of Borrower relating to the Mortgaged Property for that fiscal year and, when requested by Lender, a balance sheet showing all assets and liabilities of Borrower relating to the Mortgaged Property as of the end of that fiscal year;

(2)

within 120 days after the end of each fiscal year of Borrower, and at any other time upon Lender's request, a rent schedule for the Mortgaged Property showing the name of each tenant, and for each tenant, the space occupied, the lease expiration date, the rent payable for the current month, the date through which rent has been paid, and any related information requested by Lender;

(3)

within 120 days after the end of each fiscal year of Borrower, and at any other time upon Lender's request, an accounting of all security deposits held pursuant to all Leases, including the name of the institution (if any) and the names and identification numbers of the accounts (if any) in which such security deposits are held and the name of the person to contact at such financial institution, along with any authority or release necessary for Lender to access information regarding such accounts;

(4)

within 120 days after the end of each fiscal year of Borrower, and at any other time upon Lender's request, a statement that identifies all owners of any interest in Borrower and the interest held by each, if Borrower is a corporation, all officers and directors of Borrower, and if Borrower is a limited liability company, all managers who are not members;

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(5)

upon Lender's request, a monthly property management report for the Mortgaged Property, showing the number of inquiries made and rental applications received from tenants or prospective tenants and deposits received from tenants and any other information requested by Lender;

(6)

upon Lender's request, a balance sheet, a statement of income and expenses for Borrower and a statement of changes in financial position of Borrower for Borrower's most recent fiscal year; and

(7)

if required by Lender, a statement of income and expense for the Mortgaged Property for the prior month or quarter.

(c)

Each of the statements, schedules and reports required by Section 14(b) shall be certified to be complete and accurate by an individual having authority to bind Borrower, and shall be in such form and contain such detail as Lender may reasonably require.  Lender also may require that any statements, schedules or reports be audited at Borrower's expense by independent certified public accountants acceptable to Lender.

(d)

If Borrower fails to provide in a timely manner the statements, schedules and reports required by Section 14(b), Lender shall have the right to have Borrower's books and records audited, at Borrower’s expense, by independent certified public accountants selected by Lender in order to obtain such statements, schedules and reports, and all related costs and expenses of Lender shall become immediately due and payable and shall become an additional part of the Indebtedness as provided in Section 12.

(e)

If an Event of Default has occurred and is continuing, Borrower shall deliver to Lender upon written demand all books and records relating to the Mortgaged Property or its operation.

(f)

Borrower authorizes Lender to obtain a credit report on Borrower at any time.

(g)

If an Event of Default has occurred and Lender has not previously required Borrower to furnish a quarterly statement of income and expense for the Mortgaged Property, Lender may require Borrower to furnish such a statement within 45 days after the end of each fiscal quarter of Borrower following such Event of Default.

15.

TAXES; OPERATING EXPENSES.

(a)

Subject to the provisions of Section 15(c) and Section 15(d), Borrower shall pay, or cause to be paid, all Taxes when due and before the addition of any interest, fine, penalty  or cost for nonpayment.

(b)

Subject to the provisions of Section 15(c), Borrower shall pay the expenses of operating, managing, maintaining and repairing the Mortgaged Property (including insurance premiums, utilities, repairs and replacements) before the last date upon which each such payment may be made without any penalty or interest charge being added.

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(c)

As long as no Event of Default exists and Borrower has timely delivered to Lender any bills or premium notices that it has received, Borrower shall not be obligated to pay Taxes, insurance premiums or any other individual Imposition to the extent that sufficient Imposition Deposits are held by Lender for the purpose of paying that specific Imposition.  If an Event of Default exists, Lender may exercise any rights Lender may have with respect to Imposition Deposits without regard to whether Impositions are then due and payable.  Lender shall have no liability to Borrower for failing to pay any Impositions to the extent that any Event of Default has occurred and is continuing, insufficient Imposition Deposits are held by Lender at the time an Imposition becomes due and payable or Borrower has failed to provide Lender with bills and premium notices as provided above.

(d)

Borrower, at its own expense, may contest by appropriate legal proceedings, conducted diligently and in good faith, the amount or validity of any Imposition other than insurance premiums, if (1) Borrower notifies Lender of the commencement or expected commencement of such proceedings, (2) the Mortgaged Property is not in danger of being sold or forfeited, (3) Borrower deposits with Lender reserves sufficient to pay the contested Imposition, if requested by Lender, and (4) Borrower furnishes whatever additional security is required in the proceedings or is reasonably requested by Lender, which may include the delivery to Lender of the reserves established by Borrower to pay the contested Imposition.

(e)

Borrower shall promptly deliver to Lender a copy of all notices of, and invoices for, Impositions, and if Borrower pays any Imposition directly, Borrower shall promptly furnish to Lender receipts evidencing such payments.

16.

LIENS; ENCUMBRANCES.  Borrower acknowledges that, to the extent provided in Section 21, the grant, creation or existence of any mortgage, deed of trust, deed to secure debt, security interest or other lien or encumbrance (a "Lien") on the Mortgaged Property (other than the lien of this Instrument) or on certain ownership interests in Borrower, whether voluntary, involuntary or by operation of law, and whether or not such Lien has priority over the lien of this Instrument, is a "Transfer" which constitutes an Event of Default.

17.

PRESERVATION, MANAGEMENT AND MAINTENANCE OF MORTGAGED PROPERTY.

(a)

Borrower (1) shall not commit waste or permit impairment or deterioration of the Mortgaged Property, (2) shall not abandon the Mortgaged Property, (3) shall restore or repair promptly, in a good and workmanlike manner, any damaged part of the Mortgaged Property to the equivalent of its original condition, or such other condition as Lender may approve in writing, whether or not insurance proceeds or condemnation awards are available to cover any costs of such restoration or repair, (4) shall keep the Mortgaged Property in good repair, including the replacement of Personalty and Fixtures with items of equal or better function and quality, (5) shall provide for professional management of the Mortgaged Property by a residential rental property manager satisfactory to Lender under a contract approved by Lender in writing, and (6) shall give notice to Lender of and, unless otherwise directed in writing by Lender, shall appear in and defend any action or proceeding purporting to affect the Mortgaged Property, Lender's security or Lender's rights under this Instrument.  Borrower shall not (and shall not permit any tenant or other person to) remove, demolish or alter the Mortgaged Property or any part of the Mortgaged Property except in connection with the replacement of tangible Personalty.

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(b)

If, in connection with the making of the loan evidenced by the Note or at any later date, Lender waives in writing the requirement of Section 17(a)(5) above that Borrower enter into a written contract for management of the Mortgaged Property and if, after the date of this Instrument, Borrower intends to change the management of the Mortgaged Property, Lender shall have the right to approve such new property manager and the written contract for the management of the Mortgaged Property and require that Borrower and such new property manager enter into an Assignment of Management Agreement on a form approved by Lender.  If required by Lender (whether before or after an Event of Default), Borrower will cause any Affiliate of Borrower to whom fees are payable for the management of the Mortgaged Property to enter into an agreement with Lender, in a form approved by Lender, providing for subordinat ion of those fees and such other provisions as Lender may require.  "Affiliate of Borrower" means any corporation, partnership, joint venture, limited liability company, limited liability partnership, trust or individual controlled by, under common control with, or which controls Borrower (the term "control" for these purposes shall mean the ability, whether by the ownership of shares or other equity interests, by contract or otherwise, to elect a majority of the directors of a corporation, to make management decisions on behalf of, or independently to select the managing partner of, a partnership, or otherwise to have the power independently to remove and then select a majority of those individuals exercising managerial authority over an entity, and control shall be conclusively presumed in the case of the ownership of 50% or more of the equity interests).

18.

ENVIRONMENTAL HAZARDS.

(a)

Except for matters covered by a written program of operations and maintenance approved in writing by Lender (an "O&M Program") or matters described in Section 18(b), Borrower shall not cause or permit any of the following:

(1)

the presence, use, generation, release, treatment, processing, storage (including storage in above ground and underground storage tanks), handling, or disposal of any Hazardous Materials on or under the Mortgaged Property or any other  property of Borrower that is adjacent to the Mortgaged Property;

(2)

the transportation of any Hazardous Materials to, from, or across the Mortgaged Property;

(3)

any occurrence or condition on the Mortgaged Property or any other property of Borrower that is adjacent to the Mortgaged Property, which occurrence or condition is or may be in violation of Hazardous Materials Laws; or

(4)

any violation of or noncompliance with the terms of any Environmental Permit with respect to the Mortgaged Property or any  property of Borrower that is adjacent to the Mortgaged Property.

The matters described in clauses (1) through (4) above are referred to collectively in this Section 18 as "Prohibited Activities or Conditions".

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(b)

Prohibited Activities and Conditions shall not include the safe and lawful use and storage of quantities of (1) pre-packaged supplies, cleaning materials and petroleum products customarily used in the operation and maintenance of comparable multifamily properties, (2) cleaning materials, personal grooming items and other items sold in pre-packaged containers for consumer use and used by tenants and occupants of residential dwelling units in the Mortgaged Property; and (3) petroleum products used in the operation and maintenance of motor vehicles from time to time located on the Mortgaged Property’s parking areas, so long as all of the foregoing are used, stored, handled, transported and disposed of in compliance with Hazardous Materials Laws.

(c)

Borrower shall take all commercially reasonable actions (including the inclusion of appropriate provisions in any Leases executed after the date of this Instrument) to prevent its employees, agents, and contractors, and all tenants and other occupants from causing or permitting any Prohibited Activities or Conditions.  Borrower shall not lease or allow the sublease or use of all or any portion of the Mortgaged Property to any tenant or subtenant for nonresidential use by any user that, in the ordinary course of its business, would cause or permit any Prohibited Activity or Condition.

(d)

If an O&M Program has been established with respect to Hazardous Materials, Borrower shall comply in a timely manner with, and cause all employees, agents, and contractors of Borrower and any other persons present on the Mortgaged Property to comply with the O&M Program.  All costs of performance of Borrower's obligations under any O&M Program shall be paid by Borrower, and Lender's out-of-pocket costs incurred in connection with the monitoring and review of the O&M Program and Borrower's performance shall be paid by Borrower upon demand by Lender.  Any such out-of-pocket costs of Lender which Borrower fails to pay promptly shall become an additional part of the Indebtedness as provided in Section 12.

(e)

Borrower represents and warrants to Lender that, except as previously disclosed by Borrower to Lender in writing:

(1)

Borrower has not at any time engaged in, caused or permitted any Prohibited Activities or Conditions;

(2)

to the best of Borrower's knowledge after reasonable and diligent inquiry, no Prohibited Activities or Conditions exist or have existed;

(3)

except to the extent previously disclosed by Borrower to Lender in writing, the Mortgaged Property does not now contain any underground storage tanks, and, to the best of Borrower’s knowledge after reasonable and diligent inquiry, the Mortgaged Property has not contained any underground storage tanks in the past.  If there is an underground storage tank located on the Property which has been previously disclosed by Borrower to Lender in writing, that tank complies with all requirements of Hazardous Materials Laws;

(4)

Borrower has complied with all Hazardous Materials Laws, including all requirements for notification regarding releases of Hazardous Materials.  Without limiting the generality of the foregoing, Borrower has obtained all

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Environmental Permits required for the operation of the Mortgaged Property in accordance with Hazardous Materials Laws now in effect and all such Environmental Permits are in full force and effect;  

(5)

no event has occurred with respect to the Mortgaged Property that constitutes, or with the passing of time or the giving of notice would constitute, noncompliance with the terms of any Environmental Permit;

(6)

there are no actions, suits, claims or proceedings pending or, to the best of Borrower’s knowledge after reasonable and diligent inquiry, threatened  that involve the Mortgaged Property and allege, arise out of, or relate to any Prohibited Activity or Condition; and

(7)

Borrower has not received any complaint, order, notice of violation or other communication from any Governmental Authority with regard to air emissions, water discharges, noise emissions or Hazardous Materials, or any other environmental, health or safety matters affecting the Mortgaged Property or any other property of Borrower that is adjacent to the Mortgaged Property.

The representations and warranties in this Section 18 shall be continuing representations and warranties that shall be deemed to be made by Borrower throughout the term of the loan evidenced by the Note, until the Indebtedness has been paid in full.

(f)

Borrower shall promptly notify Lender in writing upon the occurrence of any of  the following events:

(1)

Borrower's discovery of any Prohibited Activity or Condition;

(2)

Borrower’s receipt of or knowledge of any complaint, order, notice of violation or other communication from any Governmental Authority or other person with regard to present or future alleged Prohibited Activities or Conditions or any other environmental, health or safety matters affecting the Mortgaged Property or any other property of Borrower that is adjacent to the Mortgaged Property; and  

(3)

any representation or warranty in this Section 18 becomes untrue after the date of this Agreement.

Any such notice given by Borrower shall not relieve Borrower of, or result in a waiver of, any obligation under this Instrument, the Note, or any other Loan Document.

(g)

Borrower shall pay promptly the costs of any environmental inspections, tests or audits ("Environmental Inspections") required by Lender in connection with any foreclosure or deed in lieu of foreclosure, or as a condition of Lender’s consent to any Transfer under Section 21, or required by Lender following a reasonable determination by Lender that Prohibited Activities or Conditions may exist.  Any such costs incurred by Lender (including the fees and out-of-pocket

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costs of attorneys and technical consultants whether incurred in connection with any judicial or administrative process or otherwise) which Borrower fails to pay promptly shall become an additional part of the Indebtedness as provided in Section 12.  The results of all Environmental Inspections made by Lender shall at all times remain the property of Lender and Lender shall have no obligation to disclose or otherwise make available to Borrower or any other party such results or any other information obtained by Lender in connection with its Environmental Inspections.  Lender hereby reserves the right, and Borrower hereby expressly authorizes Lender, to make available to any party, including any prospective bidder at a foreclosure sale of the Mortgaged Property, the results of any Environmental Inspections made by Lender with respect to the Mortg aged Property.  Borrower consents to Lender notifying any party (either as part of a notice of sale or otherwise) of the results of any of Lender's Environmental Inspections.  Borrower acknowledges that Lender cannot control or otherwise assure the truthfulness or accuracy of the results of any of its Environmental Inspections and that the release of such results to prospective bidders at a foreclosure sale of the Mortgaged Property may have a material and adverse effect upon the amount which a party may bid at such sale.  Borrower agrees that Lender shall have no liability whatsoever as a result of delivering the results of any of its Environmental Inspections to any third party, and Borrower hereby releases and forever discharges Lender from any and all claims, damages, or causes of action, arising out of, connected with or incidental to the results of, the delivery of any of Lender's Environmental Inspections.

(h)

If any investigation, site monitoring, containment, clean-up, restoration or other remedial work ("Remedial Work") is necessary to comply with any Hazardous Materials Law or order of any Governmental Authority that has or acquires jurisdiction over the Mortgaged Property or the use, operation or improvement of the Mortgaged Property under any Hazardous Materials Law, Borrower shall, by the earlier of (1) the applicable deadline required by Hazardous Materials Law or (2) 30 days after notice from Lender demanding such action, begin performing the Remedial Work, and thereafter diligently prosecute it to completion, and shall in any event complete the work by the time required by applicable Hazardous Materials Law.  If Borrower fails to begin on a timely basis or diligently prosecute any required Remedial Work, Lender may, at its option, cause the Remedial Work to be completed, in which case Borrower shall reimburse Lender on demand for the cost of doing so.  Any reimbursement due from Borrower to Lender shall become part of the Indebtedness as provided in Section 12.

(i)

Borrower shall cooperate with any inquiry by any Governmental Authority and shall comply with any governmental or judicial order which arises from any alleged Prohibited Activity or Condition.

(j)

Borrower shall indemnify, hold harmless and defend (i) Lender, (ii) any prior owner or holder of the Note, (iii) the Loan Servicer, (iv) any prior Loan Servicer, (v) the officers, directors, shareholders, partners, employees and trustees of any of the foregoing, and (vi) the heirs, legal representatives, successors and assigns of each of the foregoing (collectively, the "Indemnitees") from and against all proceedings, claims, damages, penalties and costs (whether initiated or sought by Governmental Authorities or private parties), including fees and out-of-pocket expenses of attorneys and expert witnesses, investigatory fees, and remediation costs, whether incurred in connection with any judicial or administrative process or otherwise, arising directly or indirectly from any of the following:

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(1)

any breach of any representation or warranty of Borrower in this Section 18;  

(2)

any failure by Borrower to perform any of its obligations under this Section 18;

(3)

the existence or alleged existence of any Prohibited Activity or Condition;

(4)

the presence or alleged presence of Hazardous Materials on or under the Mortgaged Property or any property of Borrower that is adjacent to the Mortgaged Property; and

(5)

the actual or alleged violation of any Hazardous Materials Law.  

(k)

Counsel selected by Borrower to defend Indemnitees shall be subject to the  approval of those Indemnitees.  However, any Indemnitee may elect to defend any claim or legal or administrative proceeding at the Borrower's expense.

(l)

Borrower shall not, without the prior written consent of those Indemnitees who are named as parties to a claim or legal or administrative proceeding (a "Claim"), settle or compromise the Claim if the settlement (1) results in the entry of any judgment that does not include as an unconditional term the delivery by the claimant or plaintiff to Lender of a written release of those Indemnitees, satisfactory in form and substance to Lender; or (2) may materially and adversely affect Lender, as determined by Lender in its discretion.

(m)

Lender agrees that the indemnity under this Section 18 shall be limited to the assets of Borrower and Lender shall not seek to recover any deficiency from any natural persons who are general partners of Borrower.

(n)

Borrower shall, at its own cost and expense, do all of the following:

(1)

pay or satisfy any judgment or decree that may be entered against any Indemnitee or Indemnitees in any legal or administrative proceeding incident to any matters against which Indemnitees are entitled to be indemnified under this Section 18;

(2)

reimburse Indemnitees for any expenses paid or incurred in connection with any matters against which Indemnitees are entitled to be indemnified under this Section 18; and

(3)

reimburse Indemnitees for any and all expenses, including fees and out-of-pocket expenses of attorneys and expert witnesses, paid or incurred in connection with the enforcement by Indemnitees of their rights under this Section 18, or in monitoring and participating in any legal or administrative proceeding.

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(o)

In any circumstances in which the indemnity under this Section 18 applies, Lender may employ its own legal counsel and consultants to prosecute, defend or negotiate any claim or legal or administrative proceeding and Lender, with the prior written consent of Borrower (which shall not be unreasonably withheld, delayed or conditioned), may settle or compromise any action or legal or administrative proceeding.  Borrower shall reimburse Lender upon demand for all costs and expenses incurred by Lender, including all costs of settlements entered into in good faith, and the fees and out-of-pocket expenses of such attorneys and consultants.

(p)

The provisions of this Section 18 shall be in addition to any and all other obligations and liabilities that Borrower may have  under applicable law or under other Loan Documents, and each Indemnitee shall be entitled to indemnification under this Section 18 without regard to whether Lender or that Indemnitee has exercised any rights against the Mortgaged Property or any other security, pursued any rights against any guarantor, or pursued any other rights available under the Loan Documents or applicable law. If Borrower consists of more than one person or entity, the obligation of those persons or entities to indemnify the Indemnitees under this Section 18 shall be joint and several. The obligation of Borrower to indemnify the Indemnitees under this Section 18 shall survive any repayment or discharge of the Indebtedness, any foreclosure proceeding, any foreclosure sale, a ny delivery of any deed in lieu of foreclosure, and any release of record of the lien of this Instrument.

19.

PROPERTY AND LIABILITY INSURANCE.

(a)

Borrower shall keep the Improvements insured at all times against such hazards as Lender may from time to time require, which insurance shall include but not be limited to coverage against loss by fire and allied perils, general boiler and machinery coverage, and business income coverage.  Lender's insurance requirements may change from time to time throughout the term of the Indebtedness.  If Lender so requires, such insurance shall also include sinkhole insurance, mine subsidence insurance, earthquake insurance, and, if the Mortgaged Property does not conform to applicable zoning or land use laws, building ordinance or law coverage.  If any of the Improvements is located in an area identified by the Federal Emergency Management Agency (or any successor to that agency) as an area having special flood hazards, and if flood insurance is available in that area, Borrower shall insure such Improvements against loss by flood.

(b)

All premiums on insurance policies required under Section 19(a) shall be paid in the manner provided in Section 7, unless Lender has designated in writing another method of payment.  All such policies shall also be in a form approved by Lender.  All policies of property damage insurance shall include a non-contributing, non-reporting mortgage clause in favor of, and in a form approved by, Lender.  Lender shall have the right to hold the original policies or duplicate original policies of all insurance required by Section 19(a).  Borrower shall promptly deliver to Lender a copy of all renewal and other notices received by Borrower with respect to the policies and all receipts for paid premiums.  At least 30 days prior to the expiration date of a policy, Borrower shall deliver to Lender the original  (or a duplicate original) of a renewal policy in form satisfactory to Lender.

(c)

Borrower shall maintain at all times commercial general liability insurance, workers' compensation insurance and such other liability, errors and omissions and fidelity insurance coverages as Lender may from time to time require.

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(d)

All insurance policies and renewals of insurance policies required by this Section 19 shall be in such amounts and for such periods as Lender may from time to time require, and shall be issued by insurance companies satisfactory to Lender.

(e)

Borrower shall comply with all insurance requirements and shall not permit any condition to exist on the Mortgaged Property that would invalidate any part of any insurance coverage that this Instrument requires Borrower to maintain.

(f)

In the event of loss, Borrower shall give immediate written notice to the insurance carrier and to Lender.  Borrower hereby authorizes and appoints Lender as attorney-in-fact for Borrower to make proof of loss, to adjust and compromise any claims under policies of property damage insurance, to appear in and prosecute any action arising from such property damage insurance policies, to collect and receive the proceeds of property damage insurance, and to deduct from such proceeds Lender's expenses incurred in the collection of such proceeds.  This power of attorney is coupled with an interest and therefore is irrevocable.  However, nothing contained in this Section 19 shall require Lender to incur any expense or take any action.  Lender may, at Lender's option, (1) hold the balance of such proceeds to be used to reimburse Borrower for the cost of restoring and repairing the Mortgaged Property to the equivalent of its original condition or to a condition approved by Lender (the "Restoration"), or (2) apply the balance of such proceeds to the payment of the Indebtedness, whether or not then due. To the extent Lender determines to apply insurance proceeds to Restoration, Lender shall do so in accordance with Lender's then-current policies relating to the restoration of casualty damage on similar multifamily properties.

(g)

Lender shall not exercise its option to apply insurance proceeds to the payment of the Indebtedness if all of the following conditions are met:  (1) no Event of Default (or any event which, with the giving of notice or the passage of time, or both, would constitute an Event of Default) has occurred and is continuing; (2) Lender determines, in its discretion, that there will be sufficient funds to complete the Restoration; (3) Lender determines, in its discretion, that the rental income from the Mortgaged Property after completion of the Restoration will be sufficient to meet all operating costs and other expenses, Imposition Deposits, deposits to reserves and loan repayment obligations relating to the Mortgaged Property; (4) Lender determines, in its discretion, that the Restoration will be completed before the earlier of (A) one year before the maturity date of the Note or (B) one year afte r the date of the loss or casualty; and (5) upon Lender's request, Borrower provides Lender evidence of the availability during and after the Restoration of the insurance required to be maintained by Borrower pursuant to this Section 19.

(h)

If the Mortgaged Property is sold at a foreclosure sale or Lender acquires title to the Mortgaged Property, Lender shall automatically succeed to all rights of Borrower in and to any insurance policies and unearned insurance premiums and in and to the proceeds resulting from any damage to the Mortgaged Property prior to such sale or acquisition.

20.

CONDEMNATION.

(a)

Borrower shall promptly notify Lender of any action or proceeding relating to any condemnation or other taking, or conveyance in lieu thereof, of all or any part of the Mortgaged Property, whether direct or indirect (a "Condemnation").  Borrower shall appear in and prosecute or defend any action or proceeding relating to any Condemnation unless otherwise directed by

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Lender in writing.  Borrower authorizes and appoints Lender as attorney-in-fact for Borrower to commence, appear in and prosecute, in Lender's or Borrower's name, any action or proceeding relating to any Condemnation and to settle or compromise any claim in connection with any Condemnation.  This power of attorney is coupled with an interest and therefore is irrevocable.  However, nothing contained in this Section 20 shall require Lender to incur any expense or take any action.  Borrower hereby transfers and assigns to Lender all right, title and interest of Borrower in and to any award or payment with respect to (i) any Condemnation, or any conveyance in lieu of Condemnation, and (ii) any damage to the Mortgaged Property caused by governmental action that does not result in a Condemnation.

(b)

Lender may apply such awards or proceeds, after the deduction of Lender's expenses incurred in the collection of such amounts, at Lender's option, to the restoration or repair of the Mortgaged Property or to the payment of the Indebtedness, with the balance, if any, to Borrower.  Unless Lender otherwise agrees in writing, any application of any awards or proceeds to the Indebtedness shall not extend or postpone the due date of any monthly installments referred to in the Note, Section 7 of this Instrument or any Collateral Agreement, or change the amount of such installments.  Borrower agrees to execute such further evidence of assignment of any awards or proceeds as Lender may require.

21.

TRANSFERS OF THE MORTGAGED PROPERTY OR INTERESTS IN BORROWER

(a)

The occurrence of any of the following events shall constitute an Event of Default under this Instrument:

(1)

a Transfer of all or any part of the Mortgaged Property or any interest in the Mortgaged Property;

(2)

a Transfer of a Controlling Interest in Borrower;

(3)

a Transfer of a Controlling Interest in any entity which owns, directly or indirectly through one or more intermediate entities, a Controlling Interest in Borrower;

(4)

a Transfer of all or any part of Key Principal's ownership interests (other than limited partnership interests) in Borrower, or in any other entity which owns, directly or indirectly through one or more intermediate entities, an ownership interest in Borrower;

(5)

if Key Principal is an entity, (A) a Transfer of a Controlling Interest in Key Principal, or (B) a Transfer of a Controlling Interest in any entity which owns, directly or indirectly through one or more intermediate entities, a Controlling Interest in Key Principal;

(6)

if Borrower or Key Principal is a trust, the termination or revocation of such trust; and

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(7)

a conversion of Borrower from one type of legal entity into another type of legal entity, whether or not there is a Transfer.

Lender shall not be required to demonstrate any actual impairment of its security or any increased risk of default in order to exercise any of its remedies with respect to an Event of Default under this Section 21.

(b)

The occurrence of any of the following events shall not constitute an Event of Default under this Instrument, notwithstanding any provision of Section 21(a) to the contrary:

(1)

a Transfer to which Lender has consented;

(2)

a Transfer that occurs by devise, descent, or by operation of law upon the death of a natural person;

(3)

the grant of a leasehold interest in an individual dwelling unit for a term of two years or less not containing an option to purchase;

(4)

a Transfer of obsolete or worn out Personalty or Fixtures that are contemporaneously replaced by items of equal or better function and quality, which are free of liens, encumbrances and security interests other than those created by the Loan Documents or consented to by Lender;

(5)

the grant of an easement, if before the grant Lender determines that the easement will not materially affect the operation or value of the Mortgaged Property or Lender's interest in the Mortgaged Property, and Borrower pays to Lender, upon demand, all costs and expenses incurred by Lender in connection with reviewing Borrower's request; and

(6)

the creation of a tax lien or a mechanic's, materialman's or judgment lien against the Mortgaged Property which is bonded off, released of record or otherwise remedied to Lender's satisfaction within 30 days of the date of creation.

(c)

Lender shall consent, without any adjustment to the rate at which the Indebtedness secured by this Instrument bears interest or to any other economic terms of the Indebtedness, to a Transfer that would otherwise violate this Section 21 if, prior to the Transfer, Borrower has satisfied each of the following requirements:

(1)

the submission to Lender of all information required by Lender to make the determination required by this Section 21(c);

(2)

the absence of any Event of Default;

(3)

the transferee meets all of the eligibility, credit, management and other standards (including any standards with respect to previous relationships between Lender and the transferee and the organization of the transferee)

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customarily applied by Lender at the time of the proposed Transfer to the approval of borrowers in connection with the origination or purchase of similar mortgages, deeds of trust or deeds to secure debt on multifamily properties;

(4)

the Mortgaged Property, at the time of the proposed Transfer, meets all standards as to its physical condition that are customarily applied by Lender at the time of the proposed Transfer to the approval of properties in connection with the origination or purchase of similar mortgages on multifamily properties;

(5)

in the case of a Transfer of all or any part of the Mortgaged Property, or direct or indirect ownership interests in Borrower or Key Principal (if an entity), if transferor or any other person has obligations under any Loan Document, the execution by the transferee or one or more individuals or entities acceptable to Lender of an assumption agreement (including, if applicable, an Acknowledgement and Agreement of Key Principal to Personal Liability for Exceptions to Non-Recourse Liability) that is acceptable to Lender and that, among other things, requires the transferee to perform all obligations of transferor or such person set forth in such Loan Document, and may require that the transferee comply with any provisions of this Instrument or any other Loan Document which previously may have been waived by Lender;

(6)

if a guaranty has been executed and delivered in connection with the Note, this Instrument or any of the other Loan Documents, the Borrower causes one or more individuals or entities acceptable to Lender to execute and deliver to Lender a guaranty in a form acceptable to Lender; and

(7)

Lender's receipt of all of the following:

(A)

a non-refundable review fee in the amount of $3,000 and a transfer fee equal to 1 percent of the outstanding Indebtedness immediately prior to the Transfer.

(B)

In addition, Borrower shall be required to reimburse Lender for all of Lender's out-of-pocket costs (including reasonable attorneys' fees) incurred in reviewing the Transfer request, to the extent such expenses exceed $3,000.

(d)

For purposes of this Section, the following terms shall have the meanings set forth below:

(1)

"Initial Owners" means, with respect to Borrower or any other entity, the persons or entities who on the date of the Note own in the aggregate 100% of the ownership interests in Borrower or that entity.

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(2)

A Transfer of a "Controlling Interest" shall mean, with respect to any entity, the following:

(i)

if such entity is a general partnership or a joint venture, a Transfer of any general partnership interest or joint venture interest which would cause the Initial Owners to own less than 51% of all general partnership or joint venture interests in such entity;

(ii)

if such entity is a limited partnership, a Transfer of any general partnership interest;

(iii)

if such entity is a limited liability company or a limited liability partnership, a Transfer of any membership or other ownership interest which would cause the Initial Owners to own less than 51% of all membership or other ownership interests in such entity;

(iv)

if such entity is a corporation (other than a Publicly-Held Corporation) with only one class of voting stock, a Transfer of any voting stock which would cause the Initial Owners to own less than 51% of voting stock in such corporation;

(v)

if such entity is a corporation (other than a Publicly-Held Corporation) with more than one class of voting stock, a Transfer of any voting stock which would cause the Initial Owners to own less than a sufficient number of shares of voting stock having the power to elect the majority of directors of such corporation; and

(vi)

if such entity is a trust, the removal, appointment or substitution of a trustee of such trust other than (A) in the case of a land trust, or (B) if the trustee of such trust after such removal, appointment or substitution is a trustee identified in the trust agreement approved by Lender.

(3)

"Publicly-Held Corporation" shall mean a corporation the outstanding voting stock of which is registered under Section 12(b) or 12(g) of the Securities and Exchange Act of 1934, as amended.

22.

EVENTS OF DEFAULT.  The occurrence of any one or more of the following shall constitute an Event of Default under this Instrument:

(a)

any failure by Borrower to pay or deposit when due any amount required by the Note, this Instrument or any other Loan Document;

(b)

any failure by Borrower to maintain the insurance coverage required by Section 19;

(c)

any failure by Borrower to comply with the provisions of Section 33;

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(d)

fraud or material misrepresentation or material omission by Borrower, or any of its officers, directors, trustees, general partners or managers, Key Principal, Key Individual or any guarantor in connection with (A) the application for or creation of the Indebtedness, (B) any financial statement, rent roll, or other report or information provided to Lender during the term of the Indebtedness, or (C) any request for Lender's consent to any proposed action, including a request for disbursement of funds under any Collateral Agreement;

(e)

any Event of Default under Section 21;

(f)

the commencement of a forfeiture action or proceeding, whether civil or criminal, which, in Lender's reasonable judgment, could result in a forfeiture of the Mortgaged Property or otherwise materially impair the lien created by this Instrument or Lender's interest in the Mortgaged Property;

(g)

any failure by Borrower to perform any of its obligations under this Instrument (other than those specified in Sections 22(a) through (f)), as and when required, which continues for a period of 30 days after notice of such failure by Lender to Borrower, but no such notice or grace period shall apply in the case of any such failure which could, in Lender's judgment, absent immediate exercise by Lender of a right or remedy under this Instrument, result in harm to Lender, impairment of the Note or this Instrument or any other security given under any other Loan Document;

(h)

any failure by Borrower to perform any of its obligations as and when required under any Loan Document other than this Instrument which continues beyond the applicable cure period, if any, specified in that Loan Document; and

(i)

any exercise by the holder of any other debt instrument secured by a mortgage, deed of trust or deed to secure debt on the Mortgaged Property of a right to declare all amounts due under that debt instrument immediately due and payable.

23.

REMEDIES CUMULATIVE.  Each right and remedy provided in this Instrument is distinct from all other rights or remedies under this Instrument or any other Loan Document or afforded by applicable law, and each shall be cumulative and may be exercised concurrently, independently, or successively, in any order.

24.

FORBEARANCE.

(a)

Lender may (but shall not be obligated to) agree with Borrower, from time to time, and without giving notice to, or obtaining the consent of, or having any effect upon the obligations of, any guarantor or other third party obligor, to take any of the following actions:  extend the time for payment of all or any part of the Indebtedness; reduce the payments due under this Instrument, the Note, or any other Loan Document; release anyone liable for the payment of any amounts under this Instrument, the Note, or any other Loan Document; accept a renewal of the Note; modify the terms and time of payment of the Indebtedness; join in any extension or subordination agreement; release any Mortgaged Property; take or release other or additional security; modify the rate of interest or period of amortization of the Note or change the amount of the monthly installments

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payable under the Note; and otherwise modify this Instrument, the Note, or any other Loan Document.

(b)

Any forbearance by Lender in exercising any right or remedy under the Note, this Instrument, or any other Loan Document or otherwise afforded by applicable law, shall not be a waiver of or preclude the exercise of any other right or remedy.  The acceptance by Lender of payment of all or any part of the Indebtedness after the due date of such payment, or in an amount which is less than the required payment, shall not be a waiver of Lender's right to require prompt payment when due of all other payments on account of the Indebtedness or to exercise any remedies for any failure to make prompt payment. Enforcement by Lender of any security for the Indebtedness shall not constitute an election by Lender of remedies so as to preclude the exercise of any other right available to Lender.  Lender's receipt of any awards or proceeds under Sections 19 and 20 shall not operate to cure or waive any Event of Default.

25.

LOAN CHARGES.  If any applicable law limiting the amount of interest or other charges permitted to be collected from Borrower is interpreted so that any charge provided for in any Loan Document, whether considered separately or together with other charges levied in connection with any other Loan Document, violates that law, and Borrower is entitled to the benefit of that law, that charge is hereby reduced to the extent necessary to eliminate that violation.  The amounts, if any, previously paid to Lender in excess of the permitted amounts shall be applied by Lender to reduce the principal of the Indebtedness.  For the purpose of determining whether any applicable law limiting the amount of interest or other charges permitted to be collected from Borrower has been violated, all Indebtedness which constitutes interest, as well as all other charges levied in connection with the Indebtedness which constitute interest, shall be deemed to be allocated and spread over the stated term of the Note.  Unless otherwise required by applicable law, such allocation and spreading shall be effected in such a manner that the rate of interest so computed is uniform throughout the stated term of the Note.

26.

WAIVER OF STATUTE OF LIMITATIONS.  Borrower hereby waives the right to assert any statute of limitations as a bar to the enforcement of the lien of this Instrument or to any action brought to enforce any Loan Document.

27.

WAIVER OF MARSHALLING.  Notwithstanding the existence of any other security interests in the Mortgaged Property held by Lender or by any other party, Lender shall have the right to determine the order in which any or all of the Mortgaged Property shall be subjected to the remedies provided in this Instrument, the Note, any other Loan Document or applicable law.  Lender shall have the right to determine the order in which any or all portions of the Indebtedness are satisfied from the proceeds realized upon the exercise of such remedies.  Borrower and any party who now or in the future acquires a security interest in the Mortgaged Property and who has actual or constructive notice of this Instrument waives any and all right to require the marshalling of assets or to require that any of the Mortgaged Property be sold in the inverse order of alienatio n or that any of the Mortgaged Property be sold in parcels or as an entirety in connection with the exercise of any of the remedies permitted by applicable law or provided in this Instrument.

28.

FURTHER ASSURANCES.  Borrower shall execute, acknowledge, and deliver, at its sole cost and expense, all further acts, deeds, conveyances, assignments, estoppel certificates, financing statements, transfers and assurances as Lender may require from time to time in order to

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better assure, grant, and convey to Lender the rights intended to be granted, now or in the future, to Lender under this Instrument and the Loan Documents.

29.

ESTOPPEL CERTIFICATE.  Within 10 days after a request from Lender, Borrower shall deliver to Lender a written statement, signed and acknowledged by Borrower, certifying to Lender or any person designated by Lender, as of the date of such statement, (i) that the Loan Documents are unmodified and in full force and effect  (or, if there have been modifications, that the Loan Documents are in full force and effect as modified and setting forth such modifications); (ii) the unpaid principal balance of the Note; (iii) the date to which interest under the Note has been paid; (iv) that Borrower is not in default in paying the Indebtedness or in performing or observing any of the covenants or agreements contained in this Instrument or any of the other Loan Documents (or, if the Borrower is in default, describing such default in reasonable detail); (v) whether or not there are then existin g any setoffs or defenses known to Borrower against the enforcement of any right or remedy of Lender under the Loan Documents; and (vi) any additional facts requested by Lender.

30.

GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE.

(a)

This Instrument, and any Loan Document which does not itself expressly identify the law that is to apply to it, shall be governed by the laws of the jurisdiction in which the Land is located (the "Property Jurisdiction").

(b)

Borrower agrees that any controversy arising under or in relation to the Note, this Instrument, or any other Loan Document shall be litigated exclusively in the Property Jurisdiction.  The state and federal courts and authorities with jurisdiction in the Property Jurisdiction shall have exclusive jurisdiction over all controversies which shall arise under or in relation to the Note, any security for the Indebtedness, or any other Loan Document.  Borrower irrevocably consents to service, jurisdiction, and venue of such courts for any such litigation and waives any other venue to which it might be entitled by virtue of domicile, habitual residence or otherwise.

31.

NOTICE.

(a)

All notices, demands and other communications ("notice") under or concerning this Instrument shall be in writing.  Each notice shall be addressed to the intended recipient at its address set forth in this Instrument, and shall be deemed given on the earliest to occur of (1) the date when the notice is received by the addressee; (2) the first Business Day after the notice is delivered to a recognized overnight courier service, with arrangements made for payment of charges for next Business Day delivery; or (3) the third Business Day after the notice is deposited in the United States mail with postage prepaid, certified mail, return receipt requested.  As used in this Section 31, the term "Business Day" means any day other than a Saturday, a Sunday or any other day on which Lender is not open for business.

(b)

Any party to this Instrument may change the address to which notices intended for it are to be directed by means of notice given to the other party in accordance with this Section 31.  Each party agrees that it will not refuse or reject delivery of any notice given in accordance with this Section 31, that it will acknowledge, in writing, the receipt of any notice upon request by the other party and that any notice rejected or refused by it shall be deemed for purposes of this Section 31 to

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have been received by the rejecting party on the date so refused or rejected, as conclusively established by the records of the U.S. Postal Service or the courier service.

(c)

Any notice under the Note and any other Loan Document which does not specify how notices are to be given shall be given in accordance with this Section 31.

32.

SALE OF NOTE; CHANGE IN SERVICER.  The Note or a partial interest in the Note (together with this Instrument and the other Loan Documents) may be sold one or more times without prior notice to Borrower.  A sale may result in a change of the Loan Servicer.  There also may be one or more changes of the Loan Servicer unrelated to a sale of the Note.  If there is a change of the Loan Servicer, Borrower will be given notice of the change.

33.

SINGLE ASSET BORROWER.  Until the Indebtedness is paid in full, Borrower (a) shall not acquire any real or personal property other than the Mortgaged Property and personal property related to the operation and maintenance of the Mortgaged Property;  (b) shall not operate any business other than the management and operation of the Mortgaged Property; and (c) shall not maintain its assets in a way difficult to segregate and identify.

34.

SUCCESSORS AND ASSIGNS BOUND.  This Instrument shall bind, and the rights granted by this Instrument shall inure to, the respective successors and assigns of Lender and Borrower.  However, a Transfer not permitted by Section 21 shall be an Event of Default.

35.

JOINT AND SEVERAL LIABILITY.  If more than one person or entity signs this Instrument as Borrower, the obligations of such persons and entities shall be joint and several.

36.

RELATIONSHIP OF PARTIES; NO THIRD PARTY BENEFICIARY.

(a)

The relationship between Lender and Borrower shall be solely that of creditor and debtor, respectively, and nothing contained in this Instrument shall create any other relationship between Lender and Borrower.

(b)

No creditor of any party to this Instrument and no other person shall be a third party beneficiary of this Instrument or any other Loan Document.  Without limiting the generality of the preceding sentence, (1) any arrangement (a "Servicing Arrangement") between the Lender and any Loan Servicer for loss sharing or interim advancement of funds shall constitute a contractual obligation of such Loan Servicer that is independent of the obligation of Borrower for the payment of the Indebtedness, (2) Borrower shall not be a third party beneficiary of any Servicing Arrangement, and (3) no payment by the Loan Servicer under any Servicing Arrangement will reduce the amount of the Indebtedness.

37.

SEVERABILITY; AMENDMENTS.  The invalidity or unenforceability of any provision of this Instrument shall not affect the validity or enforceability of any other provision, and all other provisions shall remain in full force and effect.  This Instrument contains the entire agreement among the parties as to the rights granted and the obligations assumed in this Instrument.  This Instrument may not be amended or modified except by a writing signed by the party against whom enforcement is sought.

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38.

CONSTRUCTION.  The captions and headings of the sections of this Instrument are for convenience only and shall be disregarded in construing this Instrument.  Any reference in this Instrument to an "Exhibit" or a "Section" shall, unless otherwise explicitly provided, be construed as referring, respectively, to an Exhibit attached to this Instrument or to a Section of this Instrument.  All Exhibits attached to or referred to in this Instrument are incorporated by reference into this Instrument.  Any reference in this Instrument to a statute or regulation shall be construed as referring to that statute or regulation as amended from time to time.  Use of the singular in this Agreement includes the plural and use of the plural includes the singular.  As used in this Instrument, the term "including" means "including, but not l imited to."

39.

LOAN SERVICING.  All actions regarding the servicing of the loan evidenced by the Note, including the collection of payments, the giving and receipt of notice, inspections of the Property, inspections of books and records, and the granting of consents and approvals, may be taken by the Loan Servicer unless Borrower receives notice to the contrary.  If Borrower receives conflicting notices regarding the identity of the Loan Servicer or any other subject, any such notice from Lender shall govern.

40.

DISCLOSURE OF INFORMATION.  Lender may furnish information regarding Borrower or the Mortgaged Property to third parties with an existing or prospective interest in the servicing, enforcement, evaluation, performance, purchase or securitization of the Indebtedness, including trustees, master servicers, special servicers, rating agencies, and organizations maintaining databases on the underwriting and performance of multifamily mortgage loans.  Borrower irrevocably waives any and all rights it may have under applicable law to prohibit such disclosure, including any right of privacy.

41.

NO CHANGE IN FACTS OR CIRCUMSTANCES.  All information in the application for the loan submitted to Lender (the "Loan Application") and in all financial statements, rent rolls, reports, certificates and other documents submitted in connection with the Loan Application are complete and accurate in all material respects.  There has been no material adverse change in any fact or circumstance that would make any such information incomplete or inaccurate.

42.

SUBROGATION.  If, and to the extent that, the proceeds of the loan evidenced by the Note are used to pay, satisfy or discharge any obligation of Borrower for the payment of money that is secured by a pre-existing mortgage, deed of trust or other lien encumbering the Mortgaged Property (a "Prior Lien"), such loan proceeds shall be deemed to have been advanced by Lender at Borrower's request, and Lender shall automatically, and without further action on its part, be subrogated to the rights, including lien priority, of the owner or holder of the obligation secured by the Prior Lien, whether or not the Prior Lien is released.

43.

ACCELERATION; REMEDIES.  At any time during the existence of an Event of Default, Lender, at Lender's option, may declare the Indebtedness to be immediately due and payable without further demand, and may foreclose this Instrument by judicial proceeding and may invoke any one or more other remedies permitted by applicable law or provided in this Instrument or in any other Loan Document.  Lender shall be entitled to collect all costs and expenses incurred in pursuing such remedies, including attorneys' fees, costs of documentary evidence, abstracts and title reports.  Lender specifically reserves the right to pursue statutory foreclosure of Borrower's rights under this Instrument pursuant to Ark. Code Ann. § 18-50-101, et seq., or, alternatively, to

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pursue judicial foreclosure of all of Borrower's rights under this Instrument.  No remedy shall be deemed exclusive, and pursuit of one remedy shall not be deemed an irrevocable election.  In particular, Lender may pursue statutory foreclosure and abandon that remedy before completion and proceed to foreclosure judicially.

44.

RELEASE.  Upon payment of the Indebtedness, Lender shall release this Instrument.  Borrower shall pay Lender's reasonable costs incurred in releasing this Instrument.

45.

WAIVER OF HOMESTEAD, DOWER, REDEMPTION, AND APPRAISEMENT.  Borrower waives all right of homestead exemption in and statutory redemption of the Mortgaged Property and all right of appraisement of the Mortgaged Property and relinquishes all rights of dower and curtesy in the Mortgaged Property.  Borrower specifically waives all redemption powers, and rights which otherwise might be available to Borrower pursuant to Ark. Code Ann. § 18-49-106, or that Act of the Arkansas General Assembly passed on May 8, 1899, and all rights of appraisal which otherwise might be available to Borrower pursuant to Ark. Code Ann. § 18-49-107.

46.

WAIVER OF TRIAL BY JURY.  BORROWER AND LENDER EACH (A) COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS INSTRUMENT OR THE RELATIONSHIP BETWEEN THE PARTIES AS BORROWER AND LENDER THAT IS TRIABLE OF RIGHT BY A JURY AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO SUCH ISSUE TO THE EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN THE FUTURE.  THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL.

ATTACHED EXHIBITS.  The following Exhibits are attached to this Instrument:

X	Exhibit A	Description of the Land (required)
X	Exhibit B	Modifications to Instrument

IN WITNESS WHEREOF, Borrower has signed and delivered this Instrument or has caused this Instrument to be signed and delivered by its duly authorized representative.

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VMS NATIONAL PROPERTIES, an Illinois joint venture general partnership

By:  VMS National Residential Portfolio I, an Illinois limited partnership, its joint venture partner

By:  Maeril, Inc., a Delaware corporation, its general partner

By: /s/Patti K. Fielding

Patti K. Fielding

Executive Vice President and Treasurer

By:  VMS National Residential Portfolio II, an Illinois limited partnership, its joint venture partner

By:  Maeril, Inc., a Delaware corporation, its general partner

By: /s/Patti K. Fielding

Patti K. Fielding

Executive Vice President and Treasurer

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EXHIBIT A

[DESCRIPTION OF THE LAND]

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EXHIBIT B

Modifications to Security Instrument

The following modifications are made to the text of the Instrument that precedes this Exhibit:

1.

Paragraph 7 is amended to add the following subparagraph:

(f)

Notwithstanding the provisions of Subparagraph 7(a), Lender will not require Borrower to deposit with Lender amounts sufficient to accumulate with Lender the entire sum required to pay Taxes, provided that Borrower delivers to Lender a letter of credit and opinion of the letter of credit issuer’s counsel, both in form and content satisfactory to Lender in its sole discretion, in an amount equal to one (1) year’s Taxes.  In the event that Borrower does not timely pay Taxes or fails to provide Lender with proof of such payment, Lender shall have the right to (i) cash the letter of credit and apply the proceeds of the same to the payment of Taxes, (ii) deposit any proceeds in excess of the amount of Taxes then due and payable into Lender’s account for Imposition Deposits and (iii) require Borrower to deposit with Lender Imposition Deposits as provided in Subpar agraph 7(a).

2.

Paragraph 18(a) is amended to add the following sections:

(5)

the presence of any form of toxic mold or fungus in the Mortgaged Property of a type which may pose a significant risk to human health or the environment or would negatively impact the value of the Mortgaged Property (collectively “Mold”);

(6)

any activity, condition, event or omission that causes the growth of Mold on or in the Mortgaged Property.

3.

The defined term “Prohibited Activities or Conditions” is amended to include the matters described in Sections 18(a)(5) and 18(a)(6).

4.

A new Section 21(a)(8) is added as follows:

(8)

if, at any time, AIMCO REIT loses the authority or the ownership interests necessary to control, either directly or indirectly, Borrower and Guarantor and Borrower’s and Grantor’s Controlling Entities (“AIMCO Authorization”), Grantor covenants to send notice of such loss of AIMCO Authorization to Lender within fifteen (15) business days.  Such loss of AIMCO Authorization, shall be deemed a Transfer hereunder, and such Transfer shall constitute an Event of Default under Section 21(a) unless AIMCO REIT regains such AIMCO Authorization within sixty (60) days after the date of the loss.

5.

Section 33 is amended by adding the following sentences at the end of such Section:

“Borrower has disclosed to and provided Lender with information relating to assets it currently owns in addition to the Mortgaged Property (the “Disclosed Assets”).  Lender acknowledges that Borrower is not a single asset entity and agrees that Borrower may continue to own and operate the Disclosed Assets until September 30, 2007.  Until the Indebtedness is paid in full, Borrower (a) shall not acquire any real or personal property other than (i) the Mortgaged Property, (ii) the Disclosed Assets, (iii) personal property related to the operation and maintenance of the Mortgaged Property and the

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Disclosed Assets, and (iv) personal property and residences used primarily for the personal use of the Borrower and their family; (b) shall not operate any business other than the management and operation of the Mortgaged Property and the Disclosed Assets; (c) shall not maintain its assets in a way which is difficult to segregate and identify and (d) grant, create or permit the existence of any new or additional mortgage, deed of trust, deed to secure debt or other lien encumbrance on any of the Disclosed Assets, the Mortgaged Property or ownership interest in the Borrower, whether voluntary, involuntary or by operation of law.  In the event the Property shall be transferred, the single asset requirements of the original Section 33 of this Instrument shall apply for any transferee.”

6.

The following new Section is added at the end of the Instrument after the last numbered Section, but there are no Sections between the last numbered Section and Section 55:

“55.  CONVEYANCE.

No later than September 30, 2007, Borrower shall convey all of its interest in the Mortgaged Property (the “Conveyance”) to a Lender-approved, single-asset, single purpose entity.  Failure to complete the Conveyance shall constitute an event of default under Section 22 of the Security Instrument.

The documents evidencing the Conveyance shall be submitted to Lender for review prior to the Conveyance, and shall be in form and substance satisfactory to Lender.  Borrower agrees to pay all costs incurred in connection with the Conveyance; including, without limitation, the legal fees, if any, of Lender’s attorneys in connection with the required review and approval and the endorsement to the Lender’s title insurance policy.

Completion of the Conveyance shall be evidenced by submission to Lender of the recorded conveyance documents and an endorsement to the Lender’s title insurance policy.

It is understood that no transfer or application fee shall be due in connection with the Conveyance, and that the Conveyance shall not be deemed to violate Section 21 of the Security Instrument respecting Transfers.”

7.

AIMCO STANDARD.

A.

Section 1(v) is modified to read as follows:

(v)

"Personalty" means all furniture, furnishings, equipment, machinery, building materials, appliances, goods, supplies, tools, books, records (whether in written or electronic form), computer equipment (hardware and software) and other tangible personal property (other than Fixtures) which are used now or in the future exclusively in connection with the ownership, management or operation of the Land or the Improvements or are located on the Land or in the Improvements, and any operating agreements relating to the Land or the Improvements, and any surveys, plans and specifications and contracts for architectural, engineering and construction services relating to the Land or the Improvements and all other intangible property and rights

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exclusively relating to the operation of, or used exclusively in connection with, the Land or the Improvements including all governmental permits relating to any activities on the Land.

B.

Section 7(c) is modified to read as follows:

(c)

Notwithstanding the provisions of  Section 7(a), Lender will not require Borrower to deposit with Lender amounts sufficient to accumulate with Lender the entire sum required to pay the water and sewer charges, fire, hazard or other insurance premiums, and ground rents.  At least annually, Borrower must provide Lender with proof of payment of all such Impositions for which Lender is not collecting Imposition Deposits.  In the event that Borrower does not timely pay any of the Impositions, or fails to provide Lender with proof of such payment, or upon the occurrence of an Event of Default hereunder, or upon Borrower’s failure to maintain the Mortgaged Property in a satisfactory manner in accordance with the requirements of this Instrument, then in any such events, Lender may require Borrower to deposit with Lender the Imposition Deposits as provided in Section 7(a).

C.

Except in a case where Lender in its discretion determines that an emergency exists, Lender may take actions specified in Section 12(a) only if Lender has notified Borrower of Borrower's failure to perform any of its obligations under this Instrument or any other Loan Document and Borrower does not cure the failure within ten (10) days after such notice.  If Lender so determines that an emergency exists, Lender shall notify Borrower of the action taken within ten (10) days after the action is taken.

D.

Sections 14(b)(4) and 14(b)(5) are modified to read as follows:

(4)

within 120 days after the end of each fiscal year of Borrower, and at any other time upon Lender's request, a statement that identifies all owners of any interest in Borrower and each general partner in Borrower, and confirming that the ownership of each other Controlling Entity has not changed in a manner that violates Section 21(a);

(5)

promptly following Lender's request, quarterly or monthly income and expense statements for the Property relating to a quarterly or monthly period, as the case may be, ending no later than 45 days before the request;

E.

For purposes of Section 14(b), Borrower shall be deemed to have delivered any statement or document "upon Lender's request" if Borrower has delivered the document promptly following Lender's request.

F.

Notwithstanding Section (14)(c), unless an Event of Default has occurred and is continuing, or Lender has determined that an event having a Material Adverse Effect has occurred, Lender may require that the financial statements required by Sections 14(b)(1), 14(b)(2) and 14(b)(3) be audited, but

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may not require that any other financial statements required by Section 14 be audited.  Certification of a statement by the chief financial officer of the entity that is the subject of the statement or, in the case of a partnership, the chief financial officer of the general partner, will be acceptable to Lender as certification by an individual having authority to bind Borrower.

G.

Lender shall not have Borrower's books and records audited pursuant to Section 14(d) unless Lender has given Borrower notice specifying the statements, schedules and reports required by Section 14(b) that Borrower has failed to provide, and Borrower has not provided such statements by the expiration of ten days after such notice.

H.

So long as Borrower is contesting the amount and validity of any Imposition other than insurance premiums diligently and in good faith as described in Section 15(d) and all of the conditions specified in clauses (1) through (4) of Section 15(d) are satisfied, Lender will refrain from applying Imposition Deposits to payment of the contested Imposition.

I.

Section 15(e) and Section 16 are modified to read as follows:

15(e)

Borrower shall promptly deliver to Lender a copy of all notices of, and invoices for Impositions, and if Borrower pays any Imposition directly (which Borrower has no obligation to do unless Imposition Deposits have been waived or are insufficient and Lender has notified Borrower of that insufficiency), Borrower shall promptly furnish to Lender receipts evidencing such payments.

16.

LIENS; ENCUMBRANCES.  Borrower acknowledges that, to the extent provided in Section 21, the grant, creation or existence of any mortgage, deed of trust, deed to secure debt, security interest or other lien or encumbrance (a “Lien”) on the Mortgaged Property (other than the lien of this Instrument), or on certain ownership interests in Borrower, whether voluntary, involuntary or by operation of law, and whether or not such lien has priority over the lien of this Instrument, is a “Transfer” which constitutes an Event of Default.

J.

For purposes of Section 18(b), "pre-packaged supplies, cleaning materials and petroleum products customarily used in the operation and maintenance of comparable multifamily properties" shall include, without limitation, pool, spa, maintenance and gardening materials.

K.

The second sentence of Section 18(c) is modified to read as follows:

Borrower shall not lease or allow the sublease or use of all or any portion of the Mortgaged Property to any tenant or subtenant for nonresidential use by any user that, in the ordinary course of its business, would be reasonably expected to cause or permit any Prohibited Activity or Condition.

L.

For purposes of Section 18(d), Borrower shall only be obligated to pay out-of-pocket expenses incurred by Lender in connection with the monitoring and

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review of an O&M Program and Borrower's performance to the extent such expenses are reasonable.

M.

Borrower's representation and warranty in Section 18(e)(4) regarding requirements for notification regarding releases of Hazardous Materials shall relate only to such releases, if any, at or affecting the Mortgaged Property.

N.

Section 18(e)(5) is modified to read as follows:

(5)

no event has occurred with respect to the Mortgaged Property that constitutes, or with the passing of time or the giving of notice would reasonably be expected to constitute, noncompliance with the terms of any Environmental Permit;

O.

Section 18(g) is modified to read as follows:

(g)

Borrower shall pay promptly the costs of any environmental inspections, tests or audits ("Environmental Inspections") required by Lender in connection with or in preparation for any foreclosure or deed in lieu of foreclosure.  Borrower shall also pay promptly the reasonable costs of any Environmental Inspections required by Lender in connection with, or as a condition of Lender's consent to any Transfer under Section 21, or required by Lender following a reasonable determination by Lender that Prohibited Activities or Conditions may exist.  Any such costs incurred by Lender (including the fees and out-of-pocket costs of attorneys and technical consultants whether incurred in connection with any judicial or administrative process or otherwise) which Borrower fails to pay promptly shall become an additional part of the Indebte dness as provided in Section 12. The results of all Environmental Inspections made by Lender in connection with or in preparation for any foreclosure or deed in lieu of foreclosure shall at all times remain the property of Lender and Lender shall have no obligation to disclose such results to or otherwise make such results available to Borrower or any other party.  Lender will make available to Borrower the results of all other Environmental Inspections made by Lender.  Lender hereby reserves the right, and Borrower hereby expressly authorizes Lender, to make available to any party, including any prospective bidder at a foreclosure sale of the Mortgaged Property, the results of any Environmental Inspections made by Lender with respect to the Mortgaged Property.  Borrower consents to Lender notifying any party (either as part of a notice of sale or otherwise) of the results of any of Lender's Environmental Inspections.  Except in the case of an Environmental Inspection performed in connect ion with a foreclosure or deed in lieu of foreclosure, or a disclosure of Environmental Inspection results that Lender is required by law to make, Lender shall notify Borrower of its intention to disclose such information and shall give Borrower ten days to provide supplemental information, explanations or corrections to accompany the disclosure. Borrower acknowledges that Lender

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cannot control or otherwise assure the truthfulness or accuracy of the results of any of its Environmental Inspections and that the release of such results to prospective bidders at a foreclosure sale of the Mortgaged Property may have a material and adverse effect upon the amount which a party may bid at such sale.  Borrower agrees that Lender shall have no liability whatsoever as a result of delivering the results of any of its Environmental Inspections to any third party, and Borrower hereby releases and forever discharges Lender from any and all claims, damages, or causes of action, arising, out of, connected with or incidental to the results of, the delivery of any of Lender's Environmental Inspections.

P.

Lender shall not commence Remedial Work under the second sentence of Section 18(h) unless Lender has given Borrower notice of its intention to do so and Borrower has not begun performing the Remedial Work within 10 days after such notice.

Q.

The following sentence is added at the end of Section 18(j):

However, Borrower shall have no obligation to indemnify any of the foregoing parties to the extent that the proceedings, claims, damages, penalties or costs arise out of the gross negligence or willful misconduct of Lender, any prior owner or holder of the Note, the Loan Servicer or any prior Loan Servicer.

R.

For purposes of Section 19(b), Lender will accept a duplicate original of any insurance policy.

S.

For purposes of Section 19(d), an insurance company will be acceptable to Lender if it has a rating in Best's Key Rating Guide of at least "A-" and a financial size category of at least “v,” provided that if Fannie Mae changes its requirements for the financial rating of insurers generally, Lender may change the requirement set forth in this sentence in a manner consistent with any such change.

T.

Clause (2) of Section 19(g) is modified to read as follows:

(2)

Lender determines, in its discretion, that the combination of insurance proceeds and amounts provided by the Borrower will be sufficient to complete the Restoration.

U.

For purposes of Section 19(h), Lender shall automatically succeed to rights of Borrower in and to insurance policies and unearned premiums only to the extent permitted by the applicable policies and insurance companies.

V.

Section 21(a)(2) is modified to read as follows:

(2)

if Borrower is a joint venture general partnership, a Transfer of (A) any general partnership interest (except for a Transfer to a Qualified REIT Subsidiary, as defined in Section 856(i)(2) of the Internal Revenue Code of 1986,

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100% owned by Apartment Investment and Management Company, a Maryland corporation or to a Qualified REIT Subsidiary, as defined in Section 856 (l)(1) of the Internal Revenue Code of 1986, 100% owned by AIMCO OP), or (B) other interests in Borrower that would cause the Initial Owners of Borrower to own less than 51% of all partnership interests in Borrower;

W.

New Sections 21(b)(7), 21(b)(8), 21(b)(9), and 21(b)(10) are added, as follows:

(7)

The Transfer of any joint venture partnership interests in Borrower provided no Change of Control occurs as a result of such Transfer.

(8)

The Transfer of shares of common stock, limited partnership interests or other beneficial or ownership interests or other forms of securities in AIMCO REIT or AIMCO OP, and the issuance of all varieties of convertible debt, equity and other similar securities of AIMCO REIT or AIMCO OP, and the subsequent Transfer of such securities; provided, however, that no Change of Control occurs as a result of such Transfer, either upon such Transfer or upon the subsequent conversion to equity of such convertible debt or other securities.

(9)

The issuance by AIMCO REIT or AIMCO OP of additional common stock, limited partnership interests or other beneficial or ownership interests, convertible debt, equity and other similar securities, and the subsequent Transfer of such convertible debt or securities; provided, however, that no Change of Control occurs as the result of such Transfer, either upon such Transfer or upon the subsequent conversion to equity of such convertible debt or other securities.

(10)

So long as AIMCO REIT owns 100% of the stock of AIMCO-LP, Inc., a Transfer of limited partnership interests that results in AIMCO-LP, Inc. owning not less than 50.1% of the limited partnership interests in AIMCO OP.

X.

Section 21(b)(8) shall apply only to a Transfer of an interest in a Controlling Entity that is prohibited by Section 21(a)(7).

Y.

A new Section 21(d) is added, as follows:

(d)

For purposes of this Section 21, the following terms shall be defined as follows:

(1)

"Change of Control" shall mean the earliest to occur of (A) the date an Acquiring Person becomes (by acquisition, consolidation, merger or otherwise),

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directly or indirectly, the beneficial owner of more than forty percent (40%) of the total Voting Equity Capital of AIMCO REIT then outstanding, or (B) the date on which AIMCO REIT shall cease to hold (whether directly or indirectly through a wholly owned intermediary entity such as AIMCO-LP, Inc. or AIMCO-GP, Inc.) at least 50.1% of the limited partnership interests in AIMCO OP, or (C) the date on which AIMCO REIT shall cease for any reason to hold (whether directly or indirectly) (i) the interests in the Joint Venture Partners held as of the date of this Instrument (as evidenced by organizational charts and documents submitted to Lender as of such date) and (ii) the Controlling Interest(s) in the Borrower, or (D) the replacement (other than solely by reason of retirement at age sixty-five or older, death or disability) of more than 50% (or such lesser percentage as is required for decisionmaking by the board of directors of trustees, if applicable) of the members of the board of directors (or trustee, if applicable) of AIMCO REIT over a one-year period where such replacement shall not have been approved by a vote of at least a majority of the board of directors (or trustees, if applicable) of AIMCO REIT then still in office who either were members of such board of directors (or trustees, if applicable) at the beginning of such one year period or whose election as members of the board of directors (or trustees, if applicable) was previously so approved.

(2)

"Acquiring Person" shall mean a "person" or group of "persons" within the meaning of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended.  However, notwithstanding the foregoing, “Acquiring Person” shall not be deemed to include any member of the Borrower Control Group unless such member has, directly or indirectly, disposed of, sold or otherwise transferred to, or encumbered or restricted (whether by means of voting trust agreement or otherwise) for the benefit of an Acquiring Person, all or any portion of the Voting Equity Capital of AIMCO REIT directly or indirectly owned or controlled by such member or such member directly or indirectly votes all or any portion of the Voting Equity Capital of AIMCO REIT, directly or indirectly, owned or controlled by such member for the taking of any action which, direc tly or indirectly constitutes or would result in a Change of Control, in which event such member of the Borrower Control Group shall be deemed to constitute an Acquiring Person to the extent of the

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Voting Equity Capital of AIMCO REIT owned or controlled by such member.

(3)

"Borrower Control Group" shall mean Terry Considine, Peter K. Kompaniez, Richard S. Ellwood, J. Landis Martin, Thomas L. Rhodes and James N. Bailey.

(4)

A "Person" shall mean an individual, an estate, a trust, a corporation, a partnership, a limited liability company or any other organization or entity (whether governmental or private).

(5)

"Security" shall have the same meaning as in Section 2(1) of the Securities Act of 1933, as amended.

(6)

"Controlling Interest(s)" shall mean (i) with respect to a partnership, such majority and/or managing general partner interests which, together with a majority of limited partnership interests if necessary for consent purposes, vest in the holder of such interests the sole power, right and authority to control the day to day operations of the Borrower; including, without limitation, the authority to manage, operate and finance the Mortgaged Property, (ii) with respect to a corporation, the number of shares which entitle the holder to elect a majority of the board of directors of the Borrower, and (iii) with respect to a limited liability company, such majority and/or managing member interests as vest in the holder of such interests the sole power, right and authority to control the day to day operations of the Borrower; including, without limitation, the authority to manage, operate and finance the Mortgaged Property.

(7)

"AIMCO REIT" shall mean Apartment Investment and Management Company, a corporation organized and existing under the laws of the State of Maryland.

(8)

"AIMCO OP" shall mean AIMCO Properties, L.P., a limited partnership organized and existing under the laws of the State of Delaware.

(9)

"Joint Venture Partners" shall mean the entities executing this Instrument on behalf of the Borrower and/or its successors or assigns in interest.

(10)

“Voting Equity Capital” shall mean Securities of any class or classes, the holders of which are

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ordinarily, in the absence of contingencies, entitled to elect a majority of the board of directors (or Persons performing similar functions).

V.

Section 22(a) is modified to read as follows:

(a)

any failure by Borrower to pay or deposit (i) any Imposition Deposit within three days after it is due, or (ii) any other amount required by the Note, this Instrument, or any other Loan Document when due.

W.

Section 28 shall obligate Borrower to provide such further assurances as Lender reasonably may require.

X.

The words "Except as otherwise disclosed to Lender in writing, before the date of this Instrument" are added at the beginning of the second sentence of Section 41.

Y.

Section 37 is modified by adding: “; provided, however, that in the event of a Transfer, any or some or all of the Modifications to Instrument set forth in Exhibit B (if any) may be modified or rendered void by Lender at Lender’s option by notice to Borrower/transferee”.  The modifications set forth in this Exhibit B shall be null and void unless title to the Mortgaged Property is vested in an entity whose Controlling Interest(s) are directly or indirectly held by AIMCO REIT or AIMCO OP.

INITIALS

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EX-10

EXHIBIT 10.59

Watergate Apartments

MULTIFAMILY NOTE

(VARIABLE LOAN)

US $4,402,999.00

As of January 18, 2007

FOR VALUE RECEIVED, the undersigned (“Borrower”) promises to pay to the order of CAPMARK FINANCE INC., a California corporation, the principal sum of Four Million Four Hundred Two Thousand Nine Hundred Ninety-Nine and 00/100 Dollars (US $4,402,999.00), with interest on each Variable Loan at an annual rate as calculated in Section 3 hereof.

This Note is executed and delivered by Borrower pursuant to one of either (i) that certain Amended and Restated Loan Agreement, dated as of September 16, 2002, by and among certain borrowers signatory thereto and Lender or (ii) that certain Loan Agreement dated as of November 1, 2002, by and among certain borrowers signatory thereto and Lender.  As used herein, the term “Loan Agreement” shall mean whichever of the loan agreements described in the preceding sentence shall apply from time to time in accordance with their respective terms, along with all amendments, supplements, replacements, restatements or other modifications thereto or thereof from time to time made.  The Loan Agreement shall evidence the obligation of Borrower to repay a Variable Loan made by Lender to Borrower in accordance with the terms of the Loan Agreement.  This Note is entitled to the benef it and security of the Loan Documents provided for in the Loan Agreement, to which reference is hereby made for a statement of all of the terms and conditions under which the Variable Loan evidenced hereby is made.  The Loan Agreement requires certain of the terms of each Variable Loan to be evidenced by one or a series of Loan Confirmation Instruments, and reference is hereby made to each such Loan Confirmation Instrument for such terms.

1.

Defined Terms.  As used in this Note, (i) the term “Lender” means the holder of this Note, and (ii) the term “Indebtedness” means the principal of, interest on, or any other amounts due at any time under, this Note, the Security Instrument or any other Loan Document, including prepayment premiums, late charges, default interest, and advances to protect the security of the Security Instrument under Section 12 of the Security Instrument.  Event of Default and other capitalized terms used but not defined in this Note shall have the meanings given to such terms in the Loan Agreement or, if not defined in the Loan Agreement, as defined in the Security Instrument (as defined in Paragraph 5).

2.

Address for Payment.  All payments due under this Note shall be payable at Capmark Finance Inc., 116 Welsh Road, Horsham, PA  19044 , Attention:  Servicing – Account Manager, or such other place as may be designated by written notice to Borrower from or on behalf of Lender.

3.

Payment of Principal and Interest.  Principal and interest shall be paid as follows:

(a)

This Note shall evidence a Variable Loan made from time to time under the Loan Agreement.  The Variable Loan shall bear interest at a rate determined in accordance with Section 2.01 of the Loan Agreement.

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(b)

Borrower shall pay imputed interest on each Variable Loan in advance in the form of a Discount in accordance with Section 1.04(b) of the Loan Agreement (except that Borrower shall pay actual interest on the Variable Loan for the partial month period, if any, in accordance with Section 1.04(a) of the Loan Agreement).  

(c)

Borrower shall make monthly payments of principal each in the amount as set forth on the attached Amortization Schedule.  Lender shall apply each such principal payment to the outstanding principal amount of the Loan on the Rollover Date next following receipt of any such payment.  If not sooner paid, the entire principal amount of the Variable Loan shall be due and payable on the earlier of (i) the termination of the Loan Agreement pursuant to subsection (e) of Section 1.02 thereof, (ii) the fifth anniversary (unless such date is extended pursuant to Section 1.07 of the Loan Agreement, in which case, the tenth anniversary) of the Initial Closing Date or (iii) the maturity date of any outstanding MBS, unless either (A) not less than five Business Days prior to the maturity date of the outstanding MBS, a Borrower has requested that the outstanding MBS be renewed wi th a new MBS or converted to a Fixed Loan to take effect on the maturity date of the outstanding MBS and such new MBS has been issued or conversion has occurred or (B) the MBS is automatically renewed, which automatic renewal shall occur in the event that a Borrower does not make the request set forth in subpart (iii)(A) above and does not give Lender notice not less than five Business days prior to the maturity date of the outstanding MBS that the Variable Loan related to such outstanding MBS shall be paid on the maturity date of such outstanding MBS (the “Maturity Date”).  Any MBS that is issued as a result of an automatic renewal of a maturing MBS as contemplated by subpart (iii)(B) above shall have a maturity date of three (3) months after the MBS Issue Date.  

(d)

In addition to payment of principal and the Discount, Borrower shall pay the Variable Loan Fee due on each Variable Loan in accordance with Section 1.04(b)(ii) of the Loan Agreement.

4.

Application of Payments.  If at any time Lender receives, from Borrower or otherwise, any amount applicable to the Indebtedness that is less than all amounts due and payable at such time, Lender may apply that payment to amounts then due and payable in any manner and in any order determined by Lender, in Lender’s discretion.  Borrower agrees that neither Lender’s acceptance of a payment from Borrower in an amount that is less than all amounts then due and payable nor Lender’s application of such payment shall constitute or be deemed to constitute either a waiver of the unpaid amounts or an accord and satisfaction.

5.

Security.  The Indebtedness is secured, among other things, by a multifamily mortgage, deed to secure debt or deed of trust dated as of the date of this Note (the “Security Instrument”) and reference is made to the Security Instrument for other rights of Lender concerning the collateral for the Indebtedness.

6.

Acceleration.  If an Event of Default has occurred and is continuing, the entire unpaid principal balance, any accrued interest, the prepayment premium payable under Paragraph 10, if any, and all other amounts payable under this Note and any other Loan Document shall at once become due and payable, at the option of Lender, without any additional notice to Borrower.  Lender may exercise this option to accelerate regardless of any prior forbearance.

7.

Late Charge.  If any monthly amount payable under this Note or under the Security Instrument or any other Loan Document is not received by Lender within 10 days after the amount is due, Borrower shall pay to Lender, immediately and without demand by Lender, a late charge equal to 5 percent of such amount.  Borrower acknowledges that its failure to make timely payments will cause Lender to incur additional expenses in servicing and processing the loan evidenced by this Note (the “Loan”), and that it is extremely difficult and impractical to determine those additional expenses.  Borrower agrees that the late charge payable pursuant to

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this Paragraph represents a fair and reasonable estimate, taking into account all circumstances existing on the date of this Note, of the additional expenses Lender will incur by reason of such late payment.  The late charge is payable in addition to, and not in lieu of, any interest payable at the Default Rate pursuant to Paragraph 8.

8.

Default Rate.  So long as any monthly installment or any other payment due under this Note remains past due for 30 days or more, interest under this Note shall accrue on the unpaid principal balance from the earlier of the due date of the first unpaid monthly installment or other payment due, as applicable, at a rate (the “Default Rate”) equal to the lesser of 4 percentage points above the rate stated in the first paragraph of this Note or the maximum interest rate which may be collected from Borrower under applicable law.  If the unpaid principal balance and all accrued interest are not paid in full on the Maturity Date, the unpaid principal balance and all accrued interest shall bear interest from the Maturity Date at the Default Rate.  Borrower also acknowledges that its failure to make timely payments will cause Lender to incur additional expenses in s ervicing and processing the Loan, that, during the time that any monthly installment or payment under this Note is delinquent for more than 30 days, Lender will incur additional costs and expenses arising from its loss of the use of the money due and from the adverse impact on Lender’s ability to meet its other obligations and to take advantage of other investment opportunities, and that it is extremely difficult and impractical to determine those additional costs and expenses.  Borrower also acknowledges that, during the time that any monthly installment or payment due under this Note is delinquent for more than 30 days, Lender’s risk of nonpayment of this Note will be materially increased and Lender is entitled to be compensated for such increased risk.  Borrower agrees that the increase in the rate of interest payable under this Note to the Default Rate represents a fair and reasonable estimate, taking into account all circumstances existing on the date of this Note, of the additional costs and expenses Lender will incur by reason of Borrower’s delinquent payment and the additional compensation Lender is entitled to receive for the increased risks of nonpayment associated with a delinquent loan.

9.

Limits on Personal Liability.

(a)

Except as otherwise provided in this Paragraph 9, Borrower shall have no personal liability under this Note, the Security Instrument or any other Loan Document for the repayment of the Indebtedness or for the performance of any other obligations of Borrower under the Loan Documents, and Lender’s only recourse for the satisfaction of the Indebtedness and the performance of such obligations shall be Lender’s exercise of its rights and remedies with respect to the Mortgaged Property and any other collateral held by Lender as security for the Indebtedness.  This limitation on Borrower’s liability shall not limit or impair Lender’s enforcement of its rights against any guarantor of the Indebtedness or any guarantor of any obligations of Borrower.

(b)

Borrower shall be personally liable to Lender for the repayment of a portion of the Indebtedness equal to any loss or damage suffered by Lender as a result of (1) failure of Borrower to pay to Lender upon demand after an Event of Default, all Rents to which Lender is entitled under Section 3(a) of the Security Instrument and the amount of all security deposits collected by Borrower from tenants then in residence; (2) failure of Borrower to apply all insurance proceeds and condemnation proceeds as required by the Security Instrument; (3) failure of Borrower to comply with Section 14(d) or (e) of the Security Instrument relating to the delivery of books and records, statements, schedules and reports; (4)  fraud or written material misrepresentation by Borrower or any officer, director, partner, member or employee of Borrower in connection with the application for or creation of the Indebtedn ess or any request for any action or consent by Lender; or (5) failure to apply Rents, first, to the payment of reasonable operating expenses (other than Property management fees that are not currently payable pursuant to the terms of an Assignment of Management Agreement or any other agreement with Lender executed in connection with the Loan) and then to amounts  (“Debt

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Service Amounts”) payable under this Note, the Security Instrument or any other Loan Document (except that Borrower will not be personally liable (i) to the extent that Borrower lacks the legal right to direct the disbursement of such sums because of a bankruptcy, receivership or similar judicial proceeding, or (ii) with respect to Rents that are distributed in any calendar year if Borrower has paid all operating expenses and Debt Service Amounts for that calendar year).

(c)

Borrower shall become personally liable to Lender for the repayment of all of the Indebtedness upon the occurrence of any of the following Events of Default: (1) Borrower’s acquisition of any property or operation of any business not permitted by Section 33 of the Security Instrument; or (2) a Transfer that is an Event of Default under Section 21 of the Security Instrument.

(d)

To the extent that Borrower has personal liability under this Paragraph 9, Lender may exercise its rights against Borrower personally without regard to whether Lender has exercised any rights against the Mortgaged Property or any other security, or pursued any rights against any guarantor, or pursued any other rights available to Lender under this Note, the Security Instrument, any other Loan Document or applicable law. For purposes of this Paragraph 9, the term “Mortgaged Property” shall not include any funds that (1) have been applied by Borrower as required or permitted by the Security Instrument prior to the occurrence of an Event of Default, or (2) Borrower was unable to apply as required or permitted by the Security Instrument because of a bankruptcy, receivership, or similar judicial proceeding.

10.

Voluntary and Involuntary Prepayments.  Pursuant to the terms of the Loan Agreement, Borrower shall pay the entire amount of the Discount on any Variable Loan in advance.  Accordingly, any Variable Loan may be prepaid in whole or in part and at any time without penalty.  Borrower shall give Lender six (6) Business Days advance notice of any prepayment.

11.

Costs and Expenses.  Borrower shall pay on demand all reasonable expenses and costs, including reasonable fees and out-of-pocket expenses of attorneys and expert witnesses and costs of investigation, incurred by Lender as a result of any default under this Note or in connection with efforts to collect any amount due under this Note, or to enforce the provisions of any of the other Loan Documents, including those incurred in post-judgment collection efforts and in any bankruptcy proceeding (including any action for relief from the automatic stay of any bankruptcy proceeding) or judicial or non-judicial foreclosure proceeding.

12.

Forbearance.  Any forbearance by Lender in exercising any right or remedy under this Note, the Security Instrument, or any other Loan Document or otherwise afforded by applicable law, shall not be a waiver of or preclude the exercise of that or any other right or remedy.  The acceptance by Lender of any payment after the due date of such payment, or in an amount which is less than the required payment, shall not be a waiver of Lender’s right to require prompt payment when due of all other payments or to exercise any right or remedy with respect to any failure to make prompt payment.  Enforcement by Lender of any security for Borrower’s obligations under this Note shall not constitute an election by Lender of remedies so as to preclude the exercise of any other right or remedy available to Lender.

13.

Waivers.  Except as expressly provided in the Loan Agreement, presentment, demand, notice of dishonor, protest, notice of acceleration, notice of intent to demand or accelerate payment or maturity, presentment for payment, notice of nonpayment, grace, and diligence in collecting the Indebtedness are waived by Borrower and all endorsers and guarantors of this Note and all other third party obligors.

14.

Loan Charges.  If any applicable law limiting the amount of interest or other charges permitted to be collected from Borrower in connection with the Loan is interpreted so

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that any interest or other charge provided for in any Loan Document, whether considered separately or together with other charges provided for in any other Loan Document, violates that law, and Borrower is entitled to the benefit of that law, that interest or charge is hereby reduced to the extent necessary to eliminate that violation.  Borrower agrees to an effective rate of interest that is the stated rate of interest plus any additional rate of interest resulting from any other charges or fees that are to be paid by Borrower to Lender that may be found by a court of competent jurisdiction to be interest.  The amounts, if any, previously paid to Lender in excess of the permitted amounts shall be applied by Lender to reduce the unpaid principal balance of this Note.  For the purpose of determining whether any applicable law limiting the amount of intere st or other charges permitted to be collected from Borrower has been violated, all Indebtedness that constitutes interest, as well as all other charges made in connection with the Indebtedness that constitute interest, shall be deemed to be allocated and spread ratably over the stated term of the Note.  Unless otherwise required by applicable law, such allocation and spreading shall be effected in such a manner that the rate of interest so computed is uniform throughout the stated term of the Note.

15.

Commercial Purpose.  Borrower represents that the Indebtedness is being incurred by Borrower solely for the purpose of carrying on a business or commercial enterprise, and not for personal, family or household purposes.

16.

Counting of Days.  Except where otherwise specifically provided, any reference in this Note to a period of “days” means calendar days, not Business Days.

17.

Governing Law; Consent to Jurisdiction; WAIVER OF JURY TRIAL.  The provisions of Section 11.07 of the Loan Agreement (entitled “Choice of Law; Consent to Jurisdiction; Waiver of Jury Trial”) are hereby incorporated into this Note by this reference to the fullest extent as if the text of such Section were set forth in its entirety herein.

18.

Captions.  The captions of the paragraphs of this Note are for convenience only and shall be disregarded in construing this Note.

19.

Notices.  All notices, demands and other communications required or permitted to be given by Lender to Borrower pursuant to this Note shall be given in accordance with Section 11.09 of the Loan Agreement.

20.

Security for this Note.  Reference is made hereby to the Loan Agreement and the Security Documents for additional rights and remedies of Lender relating to the indebtedness evidenced by this Note.  Each Security Document shall be released in accordance with the provisions of the Security Documents.

21.

Loan May Not Be Reborrowed.  Borrower may not re-borrow any amounts under this Note which it has previously borrowed and repaid under this Note.

22.

Default Under Loan Agreement and Other Loan Documents.  The occurrence of an Event of Default under the Loan Agreement or the Security Instrument shall constitute an “Event of Default” under this Note in accordance with the Loan Agreement and the Security Instrument.  Upon the occurrence of an Event of Default under the Loan Agreement or the Security Instrument, the entire principal amount outstanding hereunder and accrued interest thereon shall at once become due and payable, at the option of the holder hereof.

23.

Loan Confirmation Instruments; Accounting for Variable Loans.  The terms of the Loan Agreement and this Note govern the repayment, and all other terms relating to the Variable Loan.  However, Borrower shall execute a Loan Confirmation Instrument to create a physical instrument evidencing each MBS issued to fund the Variable Loan.  The Loan Confirmation Instrument executed by Borrower in accordance with Section 2.02 of the Loan

-5-

Agreement shall set forth the amount, term, Discount, Closing Date and certain other terms of each MBS issued to fund the Variable Loan.  The Loan Confirmation Instrument shall conclusively establish each of the terms described in the preceding sentence, absent manifest error.  The MBS evidenced by the Loan Confirmation Instrument does not represent a separate indebtedness from that evidenced by this Note.   In making proof of this Note, no other documents other than this Note shall be required.  In making proof of the amount and terms of the outstanding Variable Loans under this Note, this Note, the related Loan Confirmation Instruments, and Lender’s records concerning payments made by Borrower under this Note, shall be conclusive evidence of the terms and outstanding amounts of the Variable Loan, absent manifest error.

24.

Modifications to Note.  There are standard modifications to this Note that are attached as Exhibit B-1 and Exhibit B-2 hereto.  In addition, there may be special modifications to this Note attached as Exhibit B-3 hereto.  All such exhibits are hereby incorporated into this Note as a part hereof.

IN WITNESS WHEREOF, Borrower has signed and delivered this Note under seal or has caused this Note to be signed and delivered under seal by its duly authorized representative.  Borrower intends that this Note shall be deemed to be signed and delivered as a sealed instrument.

[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]

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VMS NATIONAL PROPERTIES, an Illinois joint venture general partnership

By:  VMS National Residential Portfolio I, an Illinois limited partnership, its joint venture partner

By:  Maeril, Inc., a Delaware corporation, its general partner

By: /s/Patti K. Fielding

Patti K. Fielding

Executive Vice President and Treasurer

By:  VMS National Residential Portfolio II, an Illinois limited partnership, its joint venture partner

By:  Maeril, Inc., a Delaware corporation, its general partner

By: /s/Patti K. Fielding

Patti K. Fielding

Executive Vice President and Treasurer

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PAY TO THE ORDER OF FANNIE MAE, WITHOUT RECOURSE.

CAPMARK FINANCE INC., a California corporation

By:/s/Max W. Foore

Max W. Foore

Vice President

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EXHIBIT B-1

GMACCM LOAN AGREEMENT MODIFICATIONS

During any time that the terms, covenants and provisions of that certain Loan Agreement dated as of November 1, 2002 and more particularly described in the second paragraph on page 1 of the Note apply to the Variable Loan evidenced by the Note, paragraphs 3 and 23 of the Note are amended and replaced with the following substitute paragraphs 3 and 23:

“3.

Payment of Principal and Interest.  Principal and interest shall be paid as follows:

(a)

This Note shall evidence a Variable Loan made from time to time under the Loan Agreement.  Borrower shall not be required to make monthly principal payments prior to the Fannie Mae Addition Date, but shall make monthly payments of principal after the Fannie Mae Reassignment Date, if it occurs, as set forth in Section 1.04(d) of the Loan Agreement.

(b)

Borrower shall pay actual interest on the Variable Loan during the period described in accordance with Section 1.04(a) of the Loan Agreement.  Borrower shall pay interest on its Variable Rate Loan in arrears at a rate equal to LIBOR Rate plus a number of basis points determined in accordance with Section 2.01 of the Loan Agreement.  For purposes of the previous sentence, the LIBOR Rate shall be reset every ninety (90) days commencing on the date that is ninety (90) days after the Initial Closing Date.  On the date the Variable Loan is funded, Borrower shall pay interest in advance from the date of funding through January 31, 2007.  On March 1, 2007 and on the first (1st) day of each calendar month thereafter, Borrower shall pay interest in arrears calculated for the actual number of days since the first (1st) day of the previous calendar month.

(c)

If not sooner paid, the entire principal amount of the Variable Loan shall be due and payable in accordance with Section 1.02 of the Loan Agreement.  

(d)

Borrower shall not pay any Discount.

23.

Loan Confirmation Instruments; Accounting for Variable Loans.  The terms of the Loan Agreement and this Note govern the repayment, and all other terms relating to the Variable Loan.  However, Borrower shall execute one or a series of Loan Confirmation Instruments to create a physical instrument evidencing the terms of the Variable Loan.  The Loan Confirmation Instrument or series of Loan Confirmation Instruments executed by Borrower in accordance with Section 2.02 of the Loan Agreement shall set forth the amount, term, the interest rate spread over the LIBOR Rate Closing Date and certain other terms related to the funding the Variable Loan.  The Loan Confirmation Instrument shall conclusively establish each of the terms described in the preceding sentence, absent manifest error.  The variable terms evidenced by the Loan Confirmation Instrument do not represe nt a separate indebtedness from that evidenced by this Note.   In making proof of this Note, no other documents other than this Note shall be required.  In making proof of the amount and terms of the outstanding Variable Loans under this Note, this Note, the related Loan Confirmation Instruments, and Lender’s records concerning payments made by Borrower under this Note, shall be conclusive evidence of the terms and outstanding amounts of the Variable Loan, absent manifest error.”

During any time that the terms, covenants and provisions of that certain Amended and Restated Loan Agreement dated as of September 16, 2002 and more particularly described in the second paragraph on page 1 of the Note apply to the Variable Loan evidenced by the Note, this Exhibit B-1 shall not apply and paragraphs 3 and 23 of the Note shall not be amended or replaced with the provisions set forth in this Exhibit B-1.

B-1

EXHIBIT B-2

AIMCO MODIFICATIONS

The following modifications are made to the text of the Note that precedes this Exhibit:

1.

Section 9(b)(4) is modified by deleting “or” at the end thereof.

2.

Section 9(b)(5) is modified to read as follows:

“(5) failure to apply Rents, first, to the payment of reasonable operating expenses (other than Property management fees that are not currently payable pursuant to the terms of an Assignment of Management Agreement or any other agreement with Lender executed in connection with the Loan) and then to amounts (“Debt Service Amounts”) payable under this Note, the Security Instrument or any other Loan Document (except that Borrower will not be personally liable (i) to the extent that Borrower lacks the legal right to direct the disbursement of such sums because of a bankruptcy, receivership or similar judicial proceeding, or (ii) with respect to Rents that are distributed in any calendar quarter if Borrower has paid all operating expenses and Debt Service Amounts for such calendar quarter to date); or”

3.

A new Section 9(b)(6) is added following Section 9(b)(5), stating as follows:

“(6) failure to pay when due any water and sewer charges, fire, hazard or other insurance premiums and ground rents owing from time to time in connection with the Mortgaged Property.”

B-2

EX-10

EXHIBIT 10.60

Watergate Apartments

GUARANTY

This Guaranty (the “Guaranty”) is made and entered into as of the 18^th day of January, 2007 by AIMCO PROPERTIES, L.P., a Delaware limited partnership (the “Guarantor”), for the benefit of CAPMARK FINANCE INC., a California corporation (“Lender”).

RECITALS

A.

Lender has agreed to execute both (i) that certain Amended and Restated Loan Agreement, dated as of September 16, 2002, by and among AIMCO Properties, L.P., a Delaware limited partnership, certain borrowers signatory thereto and Lender and (ii) that certain Loan Agreement dated as of November 1, 2002, by and among certain borrowers signatory thereto and Lender (as amended, supplemental or otherwise modified or amended and restated from time to time, the “Loan Agreement”),  pursuant to which, inter alia, Lender has agreed, subject to the terms, conditions and limitations of the Loan Agreement, to make a loan to VMS National Properties, an Illinois joint venture general partnership (the “Borrower”) from time to time loan to be evidenced by the Note (the “Loan”).  Terms used herein not defined herein have the definition given them in the Loan Agreement.

B.

The repayment of the Loan and all of the Obligations of the Borrower under the Loan Agreement or the other Loan Documents are guaranteed by this Guaranty to the extent of Borrower’s personal liability as provided in Section 9 of the Note evidencing the Loan, and except for such obligations described herein, Guarantor shall have no liability in connection with, or responsibility to perform, under or in accordance with the Loan Agreement or other Loan Documents.

C.

Guarantor owns, directly or indirectly, an ownership interest in the Borrower and will receive a direct and material benefit from the Loans to the Borrower.

D.

Lender is willing to make the Loan to the Borrower only if Guarantor agrees to enter into this Guaranty.

NOW, THEREFORE, in order to induce Lender to make the Loan to Borrower, and in consideration thereof, Guarantor hereby agrees as follows:

Section 1.

Definitions.  All capitalized terms used but not defined in this Guaranty shall have the meanings ascribed to such terms in the Loan Agreement.  The following terms shall have the meaning set forth below for purposes of this Guaranty:

“Material Adverse Effect” means, with respect to any circumstance, act, condition or event of whatever nature (including any adverse determination in any litigation, arbitration, or governmental investigation or proceeding), whether singly or in conjunction with any other event or events, act or acts, condition or conditions, or circumstance or circumstances, whether or not related, a material adverse change in or a materially adverse effect upon the present or future ability of the Guarantor, to the extent specifically referred to in the applicable provision of that Guaranty, to perform the Guaranteed Obligations.

“Net Worth” means, as of any date of determination and without double counting any item, the sum of the capital stock or other capital equity interests and additional paid-in capital

1

plus retained earnings (or minus accumulated deficits) of the Guarantor, the REIT and their respective Subsidiaries on a consolidated basis determined in conformity with GAAP.

“REIT” means Apartment Investment and Management Company, a Maryland corporation.

“Subsidiary” means, with respect to the REIT, the Guarantor or an Affiliate of either of them, a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise controlled, directly or indirectly, through one or more intermediaries, or both, by the REIT, the Guarantor or an Affiliate of either of them.

Section 2.

Guaranty of Payment.  Guarantor irrevocably, absolutely and unconditionally guarantees to Lender all of the following (collectively, the “Guaranteed Obligations”):  the due and punctual payment when due, whether at maturity or earlier, by reason of acceleration or otherwise, at all times, of all amounts for which Borrower is personally liable under Section 9 of the Note.

This Guaranty shall be an unconditional guaranty of payment and performance and not of collection, and is in no way conditioned upon any attempt by Lender to pursue or exhaust any remedy against Borrower.  This Guaranty is a continuing guaranty which shall remain in full force and effect until all of the Guaranteed Obligations have been paid and performed in full; and Guarantor shall not be released from any obligations to Lender under this Guaranty as long as any amount payable by the Borrower to Lender, or any obligation by the Borrower, under the Loan Documents is not performed, satisfied, settled or paid in full.

Section 3.

Form of Payment.  All payments under this Guaranty shall be made to Lender in immediately available funds, without reduction by any recoupment, set-off, counterclaim or cross-claim against Lender.

Section 4.

Guarantor’s Obligations are Absolute.  The obligations of Guarantor under this Guaranty shall be absolute and unconditional, shall not be subject to any counterclaim, set-off, recoupment, deduction, or defense based upon any claim Guarantor may have against Lender or Borrower and shall remain in full force and effect without regard to, and shall not be released, discharged or terminated or in any other way affected by, any circumstance or condition (whether or not Guarantor shall have any knowledge or notice thereof), including, without limitation:

(a)

any amendment or modification of, or extension of time for payment of any of the principal of, interest on or other amounts payable under the Loan Documents;

(b)

any exercise or non-exercise by Lender of any right, power or remedy under or in respect of the Loan Documents, or any waiver, consent, forbearance, indulgence or other action, inaction or omission by Lender under or in respect of the Loan Documents;

(c)

any assignment, sale or other transfer of Borrower’s interest in all or any part of the real or personal property which at any time constitutes collateral for the payment of the Guaranteed Obligations, including, without limitation, a conveyance of such property by Borrower to Lender by deed in lieu of foreclosure;

(d)

any bankruptcy, insolvency, reorganization, adjustment, dissolution, liquidation or other like proceeding involving or affecting Borrower or Lender or their respective properties or

2

creditors, or any action taken with respect to the Loan Documents by any trustee or receiver of Borrower or Lender, or by any court, in any such proceeding;

(e)

any invalidity or unenforceability, in whole or in part, of any term or provision of the Loan Documents or Borrower’s incapacity or lack of authority to enter into the Loan Documents;

(f)

any release, compromise, settlement or discharge with respect to all or any portion of Borrower’s obligations under the Loan Documents;

(g)

any acceptance of additional or substituted collateral for payment of the Guaranteed Obligations or any release or subordination of any collateral held at any time by Lender as security for the payment of the Guaranteed Obligations; or

(h)

any resort to Guarantor for payment of all or any portion of the Guaranteed Obligations, whether or not Lender shall have resorted to any collateral securing the Guaranteed Obligations, if any, or shall have proceeded to pursue or exhaust its remedies against Borrower (or any other Person) primarily or secondarily liable for the Guaranteed Obligations.

No exercise, delay in exercise or non-exercise by Lender of any right hereby given it, no dealing by Lender with Borrower, Guarantor or any other Person, no change, impairment or suspension of any right or remedy of Lender, and no act or thing which, but for this provision, could act as a release or exoneration of the liabilities of Guarantor hereunder, shall in any way affect, decrease, diminish or impair any of the obligations of Guarantor hereunder or give Guarantor or any other Person any recourse or defense against Lender.

Section 5.

Waiver.  Guarantor unconditionally waives the following:

(a)

notice of acceptance of this Guaranty and notice of any of the matters referred to in Section 4 hereof;

(b)

all notices which may be required by statute, rule of law or otherwise to preserve intact any rights which Lender may have against Guarantor under this Guaranty, including, without limitation, any demand, proof or notice of non-payment of any of the principal of, interest on or other amounts payable under the Loan Documents, and notice of any failure on the part of Borrower to perform and comply with any covenant, agreement, term or condition of the Loan Documents;

(c)

any right to the enforcement, assertion or exercise of any right, power or remedy conferred upon Lender in the Loan Documents or otherwise;

(d)

any requirement that Lender act with diligence in enforcing its rights under the Loan Documents or this Guaranty;

(e)

any right to require Lender to proceed against or exhaust its recourse against Borrower or any security or collateral held by Lender, if any, at any time for the payment of the Guaranteed Obligations or to pursue any other remedy in its power before being entitled to payment from Guarantor under this Guaranty or before proceeding against Guarantor;

(f)

any failure by Lender to file or enforce a claim against the estate (either in administration, bankruptcy or any other proceeding) of Borrower or any other Person;

3

(g)

any defense based upon an election of remedies by Lender which destroys or otherwise impairs the subrogation rights of Guarantor or the right of Guarantor (after payment of the Guaranteed Obligations) to proceed against Borrower for reimbursement, or both;

(h)

any defense based upon any taking, modification or release of any collateral for the Guaranteed Obligations, if any, or any failure to perfect any security interest in, or the taking of, or failure to take any other action with respect to, any collateral securing payment of the Guaranteed Obligations, if any;

(i)

any defense based upon the addition, substitution or release, in whole or in part, of any Person(s), including, without limitation, another guarantor, primarily or secondarily liable for or in respect of the Guaranteed Obligations;

(j)

any rights or defenses based upon an offset by Guarantor against any obligation now or hereafter owed to Guarantor by Borrower; and

(k)

all other notices which may or might be lawfully waived by Guarantor;

it being the intention hereof that Guarantor shall remain liable as principal, to the extent set forth in this Guaranty, until the payment and performance in full of the Guaranteed Obligations, notwithstanding any act, omission or thing which might otherwise operate as a legal or equitable discharge of Guarantor other than the payment and performance in full of the Guaranteed Obligations.  No delay by Lender in exercising any rights and/or powers hereunder or in taking any action to enforce Borrower’s obligations under the Loan Documents shall operate as a waiver as to such rights or powers or in any manner prejudice any and all of Lender’s rights and powers hereunder against Guarantor.  The intention of Guarantor under this Guaranty is that, so long as any of the Guaranteed Obligations remains unsatisfied, the obligations of Guarantor hereunder shall not be discharged except by performance and then only to the extent of such performance.  Guarantor agrees that Guarantor’s obligations hereunder shall not be affected by any circumstances, whether or not referred to in this Guaranty, which might constitute a legal or equitable discharge of a surety or guarantor.

Section 6.

Election of Remedies.  This Guaranty may be enforced from time to time, as often as occasion therefor may arise, and without any requirement that Lender must first pursue or exhaust any remedies available to it against Borrower under the Loan Documents or against any other Person or resort to any collateral at any time held by it for performance of the Guaranteed Obligations, if any, or any other source or means of obtaining payment of any of the Guaranteed Obligations.

Section 7.

Representations and Warranties of Guarantor.  Guarantor hereby represents and warrants to the Lender as follows:

(a)

Due Organization; Qualification.  Guarantor is qualified to transact business and is in good standing in the State in which it is organized and in each other jurisdiction in which such qualification and/or standing is necessary to the conduct of its business and where the failure to be so qualified would adversely affect the validity of, the enforceability of, or the ability of Guarantor to perform the Guaranteed Obligations.

(b)

Power and Authority.  Guarantor has the requisite power and authority (i) to own its properties and to carry on its business as now conducted and as contemplated to be conducted in connection with the performance of the Guaranteed Obligations, and (ii) to execute and deliver this Guaranty and to carry out the transactions contemplated by this Guaranty.

(c)

Due Authorization.  The execution, delivery and performance of this Guaranty has been duly authorized by all necessary action and proceedings by or on behalf of Guarantor,

4

and no further approvals or filings of any kind, including any approval of or filing with any Governmental Authority, are required by or on behalf of Guarantor as a condition to the valid execution, delivery and performance by Guarantor of this Guaranty.

(d)

Valid and Binding Obligations.  This Guaranty has been duly authorized, executed and delivered by Guarantor and constitutes the legal, valid and binding obligations of Guarantor, enforceable against Guarantor in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles affecting the enforcement of creditors’ rights generally or by equitable principles or by the exercise of discretion by any court.

(e)

Non-contravention: No Liens.  Neither the execution and delivery of this Guaranty, nor the fulfillment of or compliance with the terms and conditions of this Guaranty nor the payment or performance of the Guaranteed Obligations:

(i)

does or will conflict with or result in any breach or violation of any Applicable Law enacted or issued by any Governmental Authority or other agency having jurisdiction over Guarantor, any of the Mortgaged Properties or any other portion of the Collateral or assets of Guarantor, or any judgment or order applicable to Guarantor or to which Guarantor is subject;

(ii)

does or will conflict with or result in any material breach or violation of, or constitute a default under, any of the terms, conditions or provisions of Guarantor’s Organizational Documents, any indenture, existing agreement or other instrument to which Guarantor is a party or to which Guarantor, any of the Mortgaged Properties or any other portion of the Collateral or other assets of Guarantor is subject; or

(iii)

does or will require the consent or approval of any creditor of Guarantor, any Governmental Authority or any other Person except such consents or approvals which have already been obtained.

(f)

Pending Litigation or Other Proceedings.  Since the date of the most recent financial statements delivered to Lender pursuant to Section 8(b) of this Guaranty, there is no pending or, to the best knowledge of guarantor, threatened action, suit, proceeding or investigation, at law or in equity, before any court, board, body or official of any Governmental Authority or arbitrator which, if decided adversely to Guarantor, would have, or may reasonably be expected to have, a Material Adverse Effect on Guarantor. Guarantor is not in default with respect to any order of any Governmental Authority to any extent which would have, or may reasonably be expected to have, a Material Adverse Effect on Guarantor.

(g)

Solvency.  Guarantor is not insolvent and will not be rendered insolvent by the transaction contemplated by this Guaranty and after giving effect to such transaction, Guarantor will not be left with an unreasonably small amount of capital with which to engage in its business or undertakings, nor will Guarantor have incurred, have intended to incur, or believe that it has incurred, debts beyond its ability to pay such debts as they mature. Guarantor did not receive less than a reasonably equivalent value in exchange for incurrence of the Guaranteed Obligations.  There (i) is no contemplated, pending or, to the best of Guarantor’s knowledge, threatened bankruptcy, reorganization, receivership, insolvency or like proceeding, whether voluntary or involuntary, affecting Guarantor and (ii) has been no assertion or exercise of jurisdiction over Guarantor by any court empowered to exercise bankruptcy powers.

(h)

No Contractual Defaults.  There are no material defaults by Guarantor or, to the knowledge of Guarantor, by any other Person under any contract to which Guarantor is a party other than defaults which do not have, and are not reasonably be expected to have, a Material Adverse Effect on Guarantor.  Neither Guarantor nor, to the knowledge of Guarantor, any other

5

Person, has received notice or has any knowledge of any existing circumstances in respect of which it could receive any notice of default or breach in respect of any contracts, which default would have, or which may reasonably be expected to have, a Material Adverse Effect on Guarantor.

(i)

Representations True and Correct.  The representations and warranties made by Guarantor in this Guaranty are true, complete and correct in all material respects as of the Initial Closing Date and do not contain any untrue statement of material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.

(j)

ERISA.  Guarantor is in compliance in all material respects with all applicable provisions of ERISA and has not incurred any liability to the PBGC on a Plan under Title LV of ERISA.  None of the assets of Guarantor constitute plan assets (within the meaning of Department of Labor Regulation § 2510.3-101) of any employee benefit plan subject to Title I of ERISA.

(k)

Financial Information.  The financial statements of Guarantor which have been furnished to the Lender are complete and accurate in all material respects and present fairly the financial condition of Guarantor, as of its date in accordance with GAAP, applied on a consistent basis.  Since the date of the most recent of such financial statements no event has occurred which would have, or may reasonably be expected to have a Material Adverse Effect on Guarantor, except as disclosed in any filings made by Guarantor or its affiliates with the United States Securities and Exchange Commission (“SEC”).  Guarantor has no material contingent obligations which are not otherwise disclosed in its most recent financial statements except as disclosed in any filings made by Guarantor or its affiliates with the SEC.

(l)

Accuracy of Information.  No information, statement or report furnished in writing to the Lender by Guarantor concerning the Guarantor in connection with this Guaranty or any other Loan Document or in connection with the consummation of the transactions contemplated hereby and thereby contains any material misstatement of fact or omits to state a material fact necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading as of the date made, except to the extent that such misstatements and omissions when considered in the totality of such information, statements and reports furnished by Guarantor are not materially misleading in the aggregate; provided, however, the foregoing representation and warranty shall not apply to any information, statement or report prepared by any third party.

(m)

No Conflicts of Interest.  To the best knowledge of Guarantor, no member, officer, agent or employee of the Lender has been or is in any manner interested, directly or indirectly, in that Person’s own name, or in the name of any other Person, in the Guarantor (other than through the ownership of publicly traded shares of common stock of affiliates of the Guarantor or limited partnership units of Guarantor), the Loan Documents, or any Mortgaged Property, in any contract for property or materials to be furnished or used in connection with such Mortgaged Property or in any aspect of the transactions contemplated by the Loan Documents.

(n)

Governmental Approvals.  To the best of Guarantor’s knowledge, no Governmental Approval not already obtained or made is required for the execution and delivery of this Guaranty or the performance of the terms and provisions hereof by Guarantor.

(o)

Governmental Orders.  Guarantor is not presently under any cease or desist order or other orders of a similar nature, temporary or permanent, of any Governmental Authority which would have the effect of preventing or hindering performance of its duties hereunder, nor

6

are there any proceedings presently in progress or to its knowledge contemplated which would, if successful, lead to the issuance of any such order.

(p)

No Reliance.  Guarantor acknowledges, represents and warrants that it understands the nature and structure of the transactions contemplated by this Guaranty and the other Loan Documents; that it is familiar with the provisions of all of the documents and instruments relating to such transactions; that it understands the risks inherent in such transactions, including the risk of loss of all or any of the Mortgaged Properties; and that it has not relied on the Lender or Fannie Mae for any guidance or expertise in analyzing the financial or other consequences of the transactions contemplated by this Guaranty or any other Loan Document or otherwise relied on the Lender or Fannie Mae in any manner in connection with interpreting, entering into or otherwise in connection with this Guaranty, any other Loan Document or any of the matters contemplated hereby or thereby.

(q)

Compliance with Applicable Law.  Guarantor is in compliance with Applicable Law, including all Governmental Approvals, if any, except for such items of noncompliance that, singly or in the aggregate, have not had and are not reasonably expected to cause, a Material Adverse Effect on Guarantor.

(r)

Contracts with Affiliates.  Except for the management agreement relating to each of the Mortgaged Properties or in the ordinary course of business and on terms which are no less favorable to the Guarantor than would be obtained in a corporate arms-length transaction with an unrelated third party, Guarantor has not entered into and is not a party to any material contract, lease or other agreement with any Affiliate of Guarantor for the provision of any service, materials or supplies relating to any Mortgaged Property.

Section 8.

Affirmative Covenants of Guarantor.  Guarantor agrees and covenants with the Lender that, at all times during the Term of this Guaranty:

(a)

Maintenance of Existence.  Guarantor shall maintain its existence and continue to be a limited partnership organized under the laws of the state of its organization. Guarantor shall continue to be duly qualified to do business in each jurisdiction in which such qualification is necessary to the conduct of its business and where the failure to be so qualified would adversely affect the validity of, the enforceability of, or the ability to perform, its obligations under this Guaranty.

(b)

Financial Statements; Accountants’ Reports: Other Information.  The Guarantor shall keep and maintain at all times complete and accurate books of accounts and records in sufficient detail to correctly reflect all of the Guarantor’s financial transactions and assets. In addition, the Guarantor shall furnish, or cause to be furnished, to the Lender the following:

(i)

So long as Guarantor is a reporting company under the Securities and Exchange Act of 1934 (the “’34 Act”), promptly upon their becoming available, copies of (A) all 10K’s, 10Q’s, 8K’s, annual reports and proxy statements, and all replacement, substitute or similar filings or reports required to be filed after the date of this Guaranty by the SEC or other Governmental Authority exercising similar functions, and (B) all press releases and other statements made available generally by Guarantor to the public concerning material developments in the business of Guarantor.

(ii)

In the event Guarantor is not a reporting company under the ’34 Act,

(A)

Annual Financial Statements.  As soon as available, and in any event within 90 days after the close of its fiscal year during the Term of this Agreement, the audited balance sheet of Guarantor as of the end of such fiscal year, the audited statement of income, equity and retained earnings of Guarantor

7

for such fiscal year and the audited statement of cash flows of Guarantor for such fiscal year, all in reasonable detail and stating in comparative form the respective figures for the corresponding date and period in the prior fiscal year, prepared in accordance with GAAP, consistently applied, and accompanied by a certificate of Guarantor’s independent certified public accountants to the effect that such financial statements have been prepared in accordance with GAAP, consistently applied, and that such financial statements fairly present the results of its operations and financial condition for the periods and dates indicated with such certification to be free of exceptions and qualifications as to the scope of the audit or as to the going concern nature of the business.

(B)

Quarterly Financial Statements.  As soon as available, and in any event within 45 days after each of the first three fiscal quarters of each fiscal year during the Term of this Agreement, the unaudited balance sheet of Guarantor as of the end of such fiscal quarter, the unaudited statement of income and retained earnings of Guarantor and the unaudited statement of cash flows of Guarantor for the portion of the fiscal year ended with the last day of such quarter, all in reasonable detail and stating in comparative form the respective figures for the corresponding date and period in the previous fiscal year, accompanied by a certificate of a member of Senior Management (which certificate shall be without personal liability to such officer) stating that such financial statements have been prepared in accordance with GAAP, consistently applied, and fairly present th e results of its operations and financial condition for the periods and dates indicated subject to year end adjustments in accordance with GAAP.

(iii)

[Left blank intentionally]

(iv)

Other Reports.  Promptly upon receipt thereof, all schedules, financial statements or other similar reports delivered by the Guarantor pursuant to the Loan Documents or reasonably requested by the Lender with respect to the Guarantor’s business affairs or condition (financial or otherwise) subject to the confidentiality covenant set forth below.  

After the providing by Guarantor of any statement, report or other information on a collective basis to Standard & Poor’s, Moody’s Investors Service, Duff & Phelps, Fitch and/or any other rating agency, and/or after providing any statement, report or other information on a collective basis to the banks or other institutions providing unsecured lines of credit and loans to Guarantor, Guarantor shall promptly furnish such statement, report or other information to Lender.

As used in this Paragraph (iv), the phrase “on a collective basis” means as provided to a group as a whole as opposed to an individual basis, e.g.., providing information to a rating agency or to a bank to respond to a particular request of such rating agency or bank.

The Lender agrees to treat all Information received by it (I) under this Paragraph (iv) as confidential and (II) which Guarantor requests in writing to the Persons at the Lender who receive any Information regarding Guarantor that such information be treated as confidential; provided, however, that such Information may be disclosed (A) as required by law, (B) to officers, directors, employees, agents, partners, attorneys, auditors, accountants, engineers and other consultants of the Lender, or its successors or assigns, who need to know such Information, provided such Persons are instructed to treat such Information confidentially, (C) by the Lender to any successor or assign of such Person, (D) to any federal or state regulatory authority having jurisdiction over the Lender, or its successors or assigns, (E) to any other Person to which such delivery or

8

disclosure may be necessary or appropriate (w) in compliance with any law, rule, regulation or order applicable to the Lender, or its successors or assigns, (x) in response to any subpoena or other legal process or information investigative demand, or (y) in connection with any litigation to which the Lender, or its successors or assigns, is a party.  Guarantor agrees that Information subject to this Paragraph (iv) does not include information which (I) was publicly known, or otherwise known to the Lender, or its successors or assigns, at the time of disclosure, (II) subsequently becomes publicly known through no act of or omission by the Lender or its successors or assigns, other than through disclosure by Guarantor or by any other Person in violation of this Paragraph (iv) or  any other confidentiality arrangement and the Lender, or its successors or assigns, has knowledge of suc h violation; provided, however, that in the event the disclosing Person shall reasonably endeavor to notify Guarantor thereof as soon as possible after such disclosure has been made and Guarantor shall be afford an opportunity to seek protective orders, or such other confidential treatment of such Information as Guarantor may deem reasonable.  

(v)

Certification.  All certifications required to be delivered pursuant to this Section 8(b) shall run directly to and be for the benefit of Lender and Fannie Mae.

(c)

Maintain Licenses.  Guarantor shall procure and maintain in full force and effect all licenses, Permits, charters and registrations which are material to the conduct of its business and shall abide by and satisfy all terms and conditions of all such licenses, Permits, charters and registrations.

(d)

Access to Records; Discussions With Senior Management.  To the extent permitted by law, Guarantor shall permit the Lender to:

(i)

inspect Guarantor’s books and records related to the Borrower and the Mortgaged Property;

(ii)

discuss Guarantor’s affairs, finances and accounts with Guarantor’s Senior Management or, provided that Senior Management of Guarantor has been given the opportunity by Lender to be a party to such discussions, property managers and independent public accountants;

(iii)

provided that Senior Management of Guarantor has been given the opportunity by Lender to be a party to such discussions, discuss the Mortgaged Properties’ conditions, operations or maintenance with the managers of such Mortgaged Properties and the officers and employees of Guarantor; and

(iv)

receive any other information that the Lender deems reasonably necessary or relevant in connection with the Guaranty, any Loan Document or the Guaranteed Obligations.

Notwithstanding the foregoing, prior to an Event of Default or Potential Event of Default, all inspections shall be conducted at reasonable times during normal business hours and upon reasonable notice to the Guarantor.

(e)

Inform the Lender of Material Events.  Guarantor shall promptly, but in any event within five (5) Business Days, inform the Lender in writing of any of the following (and shall deliver to the Lender copies of any related written communications, complaints, orders, judgments and other documents relating to the following) of which Guarantor has actual knowledge:

9

(i)

Defaults.  The occurrence of any Event of Default or any Potential Event of Default under any Loan Document;

(ii)

Bankruptcy Proceedings.  The commencement of any proceedings by or against Guarantor under any applicable bankruptcy, reorganization, liquidation, insolvency or other similar law now or hereafter in effect or of any proceeding in which a receiver, liquidator, trustee or other similar official is sought to be appointed for it;

(iii)

Accounting Changes.  Any material change in Guarantor’s accounting policies or financial reporting practices; and

(iv)

Restructuring of Guarantor.  Any restructuring or reorganization of any Guarantor.

(f)

ERISA.  Guarantor shall at all times remain in compliance in all material respects with all applicable provisions of ERISA and similar requirements of the PBGC.

(g)

Further Assurances.  Provided they do not materially increase the Guaranteed Obligations of Guarantor, Guarantor, at the request of the Lender, but without incurring any liability beyond the Guaranteed Obligations, shall execute and deliver and, if necessary, file or record such statements, documents, agreements, UCC financing and continuation statements and such other instruments and take such further action as the Lender from time to time may request as reasonably necessary, desirable or proper to carry out more effectively the purposes of this Guaranty or any of the other Loan Documents or to subject the Collateral to the lien and security interests of the Loan Documents or to evidence, perfect or otherwise implement, to assure the lien and security interests intended by the terms of the Loan Documents or in order to exercise or enforce its rights under the Loan Documents.

(h)

Monitoring Compliance.  Upon the request of the Lender, but without incurring any liability beyond the Guaranteed Obligations, from time to time, Guarantor shall promptly provide to the Lender such documents, certificates and other information as may be deemed reasonably necessary to enable the Lender to perform its functions under the Servicing Agreement as the same relates to the Guarantor.

Section 9.

Negative Covenants of Guarantor.

(a) Liquidation. Guarantor shall not dissolve or liquidate in whole or in part.

(b) Principal Place of Business. Guarantor shall not change its principal place of business or the location of its books and records without first giving 10 days' prior written notice to the Lender.

Section 10. Financial Covenants. Guarantor agrees and covenants with the Lender that, at all times during the Term of this Guaranty, the Net Worth of the REIT, the Guarantor and the Subsidiaries on a consolidated basis shall not be below $1,500,000,000.

Section 11.

Expenses.  Guarantor agrees to pay all reasonable costs and out-of-pocket expenses, including court costs and expenses and the reasonable fees and disbursements of legal counsel, incurred by or on behalf of Lender in connection with the enforcement of Guarantor’s obligations under this Guaranty or the protection of Lender’s rights under this Guaranty. The covenants contained in this Section shall survive the payment of the Guaranteed Obligations.

Section 12.

Condition of Borrower.  Guarantor is fully aware of the financial condition of Borrower and is executing and delivering this Guaranty based solely upon

10

Guarantor’s own independent investigation of all matters pertinent hereto and is not relying in any manner upon any representation or statement made by Lender. Guarantor represents and warrants that Guarantor is in a position to obtain, and Guarantor hereby assumes full responsibility for obtaining, any additional information concerning Borrower’s financial condition and any other matters pertinent hereto as Guarantor may desire and Guarantor is not relying upon or expecting Lender to furnish to Guarantor any information now or hereafter in Lender’s possession concerning the same or any other matter. By executing this Guaranty, Guarantor knowingly accepts the full range of risks encompassed within a contract of this type, which risks Guarantor acknowledges.

Section 13.

Further Assurances.  Guarantor agrees at any time and from time to time upon request by Lender to take, or cause to be taken, any action and to execute and deliver any additional documents which, in the reasonable opinion of Lender, may be necessary in order to assure to Lender the full benefits of this Guaranty, so long as any such action does not materially increase Guarantor’s Guaranteed Obligations hereunder or materially decrease its rights hereunder.

Section 14.

Subordination.  Guarantor hereby irrevocably and unconditionally agrees that any claims, direct or indirect, Guarantor may have by subrogation or other form of reimbursement, against Borrower or to any security or any interest therein, by virtue of this Guaranty or as a consequence of any payment made by Guarantor pursuant to this Guaranty, shall be fully subordinated in time and right of payment to the payment in full of the Guaranteed Obligations and all other obligations of Guarantor to Lender under this Guaranty.

Section 15.

No Subrogation.  Guarantor shall not have any right of subrogation against Borrower by reason of any payment by Guarantor under this Guaranty until such time as all of the Guaranteed Obligations have been satisfied in full. Nothing in the foregoing shall affect any claim which any Guarantor has against Borrower under the terms of the Organizational Documents of the Borrower.

Section 16.

Insolvency and Liability of Borrower.  So long as any of the Guaranteed Obligations is unpaid and this Guaranty is in effect, and to the extent not prohibited by the applicable bankruptcy court, Guarantor agrees to file all claims against Borrower in any bankruptcy or other proceeding in which the filing of claims is required by law in connection with indebtedness owed by Borrower to Guarantor and to assign to Lender all rights of Guarantor thereunder up to the lesser of (i) the amount of such indebtedness or (ii) the amount of the Guaranteed Obligations.  In all such cases the Person or Persons authorized to pay such claims shall pay to Lender the full amount thereof to the full extent necessary to pay the Guaranteed Obligations, and Guarantor hereby assigns to Lender all of Guarantor’s rights to all such payments to which Guarantor would otherwise be entitled. Notw ithstanding the foregoing, and except to the extent that any sums owed by Borrower to Lender under the Loan Documents shall have been fully satisfied thereby, the liability of Guarantor hereunder shall in no way be affected by

(a)

the release or discharge of Borrower in any creditors’, receivership, bankruptcy or other proceedings; or

(b)

the impairment, limitation or modification of the liability of Borrower or the estate of Borrower in bankruptcy resulting from the operation of any present or future provisions of the Bankruptcy Code or other statute or from the decision in any court.

Section 17.

Preferences, Fraudulent Conveyances, Etc.  If Lender is required to refund, or voluntarily refunds, any payment received from Borrower because such payment is or may be avoided, invalidated, declared fraudulent, set aside or determined to be void or voidable as a preference, fraudulent conveyance, impermissible setoff or a diversion of trust funds under

11

the bankruptcy laws or for any similar reason, including, without limitation, any judgment, order or decree of any court or administrative body having jurisdiction over Lender or any of its property, or any settlement or compromise of any claim effected by Lender with Borrower or other claimant (a “Rescinded Payment”), then Guarantor’s liability to Lender shall continue in full force and effect, or Guarantor’s liability to Lender shall be reinstated, as the case may be, with the same effect and to the same extent as if the Rescinded Payment had not been received by Lender (but only to the extent such Rescinded Payment was part of the Guaranteed Obligations hereunder), notwithstanding the cancellation or termination of any Note or any of the other Loan Documents. In addition, Guarantor shall pay, or reimburse Lender for, all expenses (including all reasona ble attorneys’ fees, court costs and related disbursements) incurred by Lender in the defense of any claim that a payment received by Lender in respect of all or any part of the Guaranteed Obligations from Guarantor must be refunded. The provisions of this Section shall survive the termination of this Guaranty and any satisfaction and discharge of Borrower by virtue of any payment, court order or any federal or state law.

Section 18.

Waiver.  Neither this Guaranty nor any term hereof may be changed, waived, discharged or terminated except by an instrument in writing signed by Lender and Guarantor expressly referring to this Guaranty and to the provisions so changed or limited. No such waiver shall extend to or affect any obligation not expressly waived or impair any right consequent thereon. No course of dealing or delay or omission on the part of Lender in exercising any right under this Guaranty shall operate as a waiver thereof or otherwise by prejudice thereto.

Section 19.

Notices.  All notices or other communications hereunder shall be sufficiently given and shall be deemed given when sent in the manner prescribed by the Loan Agreement addressed to the parties as follows:

As to the Guarantor:

AIMCO

Stanford Place 3

4582 South Ulster St. Parkway

Suite 1100

Denver, Colorado  80237

Attn:  Senior Vice President-Debt & Securities

with a copy to:

Ballard Spahr Andrews & Ingersoll, LLP

Seventeenth Street Plaza Building

1225 17^th Street, Suite 2300

Denver, Colorado 80202

Attn:  Gwendolyn C. Allen, Esquire

If to Lender or Fannie Mae:

As provided in the Loan Agreement.

Section 20.

Assignability by Lender.  Lender may, without notice to Guarantor, assign or transfer the Loans and the Loan Documents, in whole or in part. In such event, each and every immediate and successive assignee, transferee or holder of all or any part of the Loans and the Loan Documents shall have the right to enforce this Guaranty, by legal action or otherwise, as fully as if such assignee, transferee, or holder were by name specifically given such right and power in this Guaranty. Lender shall have an unimpaired right to enforce this Guaranty for its benefit as to so much of the Loans and the Loan Documents as Lender has not sold, assigned or transferred.

12

Section 21.

Guarantor Bound by Judgment Against Borrower.  Guarantor shall be conclusively bound, in any jurisdiction, by the judgment in any action by Lender against Borrower in connection with the Loan Documents (wherever instituted) as if Guarantor were a party to such action even if not so joined as a party.

Section 22.

Governing Law.  The provisions of Section 11.06 of the Loan Agreement (entitled Choice of Law; Consent to Jurisdiction; Waiver of Jury Trial) are hereby incorporated into this Agreement by this reference to the fullest extent as if the text of such Section were set forth in its entirety herein.

Section 23.

Invalid Provisions.  If any provision of this Guaranty or the application thereof to Guarantor or any circumstance in any jurisdiction whose laws govern this Guaranty shall, to any extent, be invalid or unenforceable under any applicable statute, regulation or rule of law, then such provision shall be deemed inoperative to the extent of such invalidity or unenforceability and shall be deemed modified to conform to such statute, regulation or rule or law. The remainder of this Guaranty and the application of any such invalid or unenforceable provision to parties, jurisdictions or circumstances other than those to whom or to which it is held invalid or unenforceable, shall not be affected by such invalidity or unenforceability nor shall such invalidity or unenforceability affect the validity or enforceability of any other provision of this Guaranty.

Section 24.

General Provisions.  This Guaranty shall be binding upon the respective successors and assigns of Guarantor, and shall inure to the benefit of Lender and its successors and assigns, including, without limitation, each successive holder of the Note. The descriptive headings of the Sections of the Guaranty have been inserted herein for convenience of reference only and shall not define or limit the provisions hereof.

ATTACHED EXHIBITS.  The following Exhibits are attached to this Instrument:

X Exhibit A Modifications to Guaranty

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]

13

IN WITNESS WHEREOF, Guarantor has signed this Guaranty under seal as of the day and year first above written.

AIMCO PROPERTIES, L.P., a Delaware limited partnership

By:  AIMCO-GP, Inc., a Delaware corporation, its general partner

By: /s/Patti K. Fielding

Patti K. Fielding

Executive Vice President and Treasurer

14

EXHIBIT A

MODIFICATIONS TO GUARANTY

The following modifications are hereby made to the text of the Guaranty that precedes this Exhibit:

1.

A new Section 25 is hereby added as follows:

“Section 25.

Additional Guaranty Relating to Bankruptcy.  

(a)

Notwithstanding any limitation on liability provided for elsewhere in this Guaranty, Guarantor hereby absolutely, unconditionally and irrevocably guarantees to Lender the full and prompt payment when due, whether at the maturity date or earlier, by reason of acceleration or otherwise, and at all times thereafter, the entire Indebtedness, in the event that:

(i)

Borrower voluntarily files for bankruptcy protection under the United States Bankruptcy Code; or

(ii)

Borrower voluntarily becomes subject to any reorganization, receivership, insolvency proceeding, or other similar proceeding pursuant to any other federal or state law affecting debtor and creditor rights; or

(iii)

an order of relief is entered against Borrower pursuant to the United States Bankruptcy Code or other federal or state law affecting debtor and creditor rights in any involuntary bankruptcy proceeding initiated or joined in by a "Related Party."  

(b)

For purposes of this Section, the term "Related Party" means:

(i)

Borrower or Guarantor; and

(ii)

any person or entity that holds, directly or indirectly, any ownership interest in or right to manage Borrower or Guarantor, including without limitation, any shareholder, member or partner of Borrower or Guarantor; and

(iii)

any person or entity in which any ownership interest (direct or indirect) or right to manage is held by Borrower, Guarantor or any partner, shareholder or member of, or any other person or entity holding an interest in, Borrower or Guarantor; and

(iv)

any other creditor of Borrower that is related by blood, marriage or adoption to Borrower, Guarantor or any partner, shareholder or member of, or any

PAGE A-1

other person or entity holding an interest in, Borrower or Guarantor.  

If Borrower, Guarantor or any Related Party has solicited creditors to initiate or participate in any proceeding referred to in this Section, regardless of whether any of the creditors solicited actually initiates or participates in the proceeding, then such proceeding shall be considered as having been initiated by a Related Party.”

_____________

INITIALS

PAGE A-2

EX-10

EXHIBIT 10.61

Prepared by, and after recording

return to:

Brian J. Iwashyna, Esquire

Troutman Sanders LLP

P.O. Box 1122

Richmond, Virginia  23218-1122

MULTIFAMILY DEED OF TRUST,

ASSIGNMENT OF RENTS

AND SECURITY AGREEMENT

(NEBRASKA)

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -

Form 4028

11/01

NEBRASKA

Ó 1997-2001 Fannie Mae

TABLE OF CONTENTS

PAGE

1.

DEFINITIONS

2.

UNIFORM COMMERCIAL CODE SECURITY AGREEMENT

3.

ASSIGNMENT OF RENTS; APPOINTMENT OF RECEIVER; LENDER IN POSSESSION.

4.

ASSIGNMENT OF LEASES; LEASES AFFECTING THE MORTGAGED PROPERTY.

5.

PAYMENT OF INDEBTEDNESS; PERFORMANCE UNDER LOAN DOCUMENTS; PREPAYMENT PREMIUM  

6.

EXCULPATION

7.

DEPOSITS FOR TAXES, INSURANCE AND OTHER CHARGES

8.

COLLATERAL AGREEMENTS.

9.

APPLICATION OF PAYMENTS

10.

COMPLIANCE WITH LAWS

11.

USE OF PROPERTY.

12.

PROTECTION OF LENDER'S SECURITY

13.

INSPECTION

14.

BOOKS AND RECORDS; FINANCIAL REPORTING

15

TAXES; OPERATING EXPENSES

16

LIENS; ENCUMBRANCES.

17.

PRESERVATION, MANAGEMENT AND MAINTENANCE OF MORTGAGED PROPERTY

18.

ENVIRONMENTAL HAZARDS.

19.

PROPERTY AND LIABILITY INSURANCE

20.

CONDEMNATION

21.

TRANSFERS OF THE MORTGAGED PROPERTY OR INTERESTS IN BORROWER.

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -

Form 4028

11/01

Page 1

NEBRASKA

Ó 1997-2001 Fannie Mae

22.

EVENTS OF DEFAULT

23.

REMEDIES CUMULATIVE

24.

FORBEARANCE

25.

LOAN CHARGES.

26.

WAIVER OF STATUTE OF LIMITATIONS

27.

WAIVER OF MARSHALLING

28.

FURTHER ASSURANCES.

29.

ESTOPPEL CERTIFICATE

30.

GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE

31.

NOTICE

32.

SALE OF NOTE; CHANGE IN SERVICER

33.

SINGLE ASSET BORROWER

34.

SUCCESSORS AND ASSIGNS BOUND

35.

JOINT AND SEVERAL LIABILITY.

36.

RELATIONSHIP OF PARTIES; NO THIRD PARTY BENEFICIARY.

37.

SEVERABILITY; AMENDMENTS

38.

CONSTRUCTION

39.

LOAN SERVICING

40.

DISCLOSURE OF INFORMATION

41

NO CHANGE IN FACTS OR CIRCUMSTANCES

42.

SUBROGATION

43.

ACCELERATION; REMEDIES.

44.

RECONVEYANCE

45.

SUBSTITUTE TRUSTEE

46.

REQUEST FOR NOTICES

47.

WAIVER OF TRIAL BY JURY

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -

Form 4028

11/01

Page 2

NEBRASKA

Ó 1997-2001 Fannie Mae

Terrace Garden Apartments

MULTIFAMILY DEED OF TRUST,

ASSIGNMENT OF RENTS AND

SECURITY AGREEMENT

THIS MULTIFAMILY DEED OF TRUST, ASSIGNMENT OF RENTS AND SECURITY AGREEMENT (the "Instrument") is dated as of the 18^th day of January, 2007, among VMS NATIONAL PROPERTIES, a joint venture general partnership organized and existing under the laws of Illinois, whose address is c/o AIMCO, Stanford Place 3, 4582 South Ulster Street Parkway, Suite 1100, Denver, Colorado 80237, as grantor (“Borrower”), to STEWART TITLE GUARANTY COMPANY, as trustee (“Trustee”), for the benefit of CAPMARK FINANCE INC., a corporation organized and existing under the laws of California, whose address is 116 Welsh Road, Horsham, Pennsylvania 19044, Attn: Servicing-Executive Vice President, as beneficiary (“Lender”).

Borrower, in consideration of the Indebtedness and the trust created by this Instrument, irrevocably grants, conveys and assigns to Trustee, in trust, with power of sale, the Mortgaged Property, including the Land located in the County of Douglas, State of Nebraska and described in Exhibit A attached to this Instrument.

TO SECURE TO LENDER the repayment of the Indebtedness evidenced by Borrower's Multifamily Note payable to Lender dated as of the date of this Instrument, and maturing as set forth in the Loan Agreement, in the principal amount of $4,536,348.00, and all renewals, extensions and modifications of the Indebtedness, and the performance of the covenants and agreements of Borrower contained in the Loan Documents.

Borrower represents and warrants that Borrower is lawfully seized of the Mortgaged Property and has the right, power and authority to mortgage, grant, convey and assign the Mortgaged Property, and that the Mortgaged Property is unencumbered.  Borrower covenants that Borrower will warrant and defend generally the title to the Mortgaged Property against all claims and demands, subject to any easements and restrictions listed in a schedule of exceptions to coverage in any title insurance policy issued to Lender contemporaneously with the execution and recordation of this Instrument and insuring Lender's interest in the Mortgaged Property.

Covenants.  Borrower and Lender covenant and agree as follows:

1. DEFINITIONS. The following terms, when used in this Instrument (including when used in the above recitals), shall have the following meanings:

(a) "Borrower" means all persons or entities identified as "Borrower" in the first paragraph of this Instrument, together with their successors and assigns.

(b) "Collateral Agreement" means any separate agreement between Borrower and Lender for the purpose of establishing replacement reserves for the Mortgaged Property, establishing a fund to assure completion of repairs or improvements specified in that agreement, or assuring reduction of the outstanding principal balance of the Indebtedness if the occupancy of or income from the Mortgaged Property does not increase to a level specified in that agreement, or any other agreement or agreements between Borrower and Lender which provide for the establishment of any other fund, reserve or account.

(c) "Environmental Permit" means any permit, license, or other authorization issued under any Hazardous Materials Law with respect to any activities or businesses conducted on or in relation to the Mortgaged Property.

(d) "Event of Default" means the occurrence of any event listed in Section 22.

(e) "Fixtures" means all property which is so attached to the Land or the Improvements as to constitute a fixture under applicable law, including: machinery, equipment, engines, boilers, incinerators, installed building materials; systems and equipment for the purpose of supplying or distributing heating, cooling, electricity, gas, water, air, or light; antennas, cable, wiring and conduits used in connection with radio, television, security, fire prevention, or fire detection or otherwise used to carry electronic signals; telephone systems and equipment; elevators and related machinery and equipment; fire detection, prevention and extinguishing systems and apparatus; security and access control systems and apparatus; plumbing systems; water heaters, ranges, stoves, microwave ovens, refrigerators, dishwashers, garbage disposers, washers, dryers and other appliances; light fixtures, awnings, storm w indows and storm doors; pictures, screens, blinds, shades, curtains and curtain rods; mirrors; cabinets, paneling, rugs and floor and wall coverings; fences, trees and plants; swimming pools; and exercise equipment.

(f) "Governmental Authority" means any board, commission, department or body of any municipal, county, state or federal governmental unit, or any subdivision of any of them, that has or acquires jurisdiction over the Mortgaged Property or the use, operation or improvement of the Mortgaged Property.

(g) "Hazardous Materials" means petroleum and petroleum products and compounds containing them, including gasoline, diesel fuel and oil; explosives; flammable materials; radioactive materials; polychlorinated biphenyls ("PCBs") and compounds containing them; lead and lead-based paint; asbestos or asbestos-containing materials in any form that is or could become friable; underground or above-ground storage tanks, whether empty or containing any substance; any substance the presence of which on the Mortgaged Property is prohibited by any federal, state or local authority; any substance that requires special handling; and any other material or substance now or in the future defined as a "hazardous substance," "hazardous material," "hazardous waste," "toxic substance," "toxic pollutant," "contaminant," or "pollutant" ; within the meaning of any Hazardous Materials Law.

(h) "Hazardous Materials Laws" means all federal, state, and local laws, ordinances and regulations and standards, rules, policies and other governmental requirements, administrative rulings and court judgments and decrees in effect now or in the future and including all amendments, that relate to Hazardous Materials and apply to Borrower or to the Mortgaged Property. Hazardous Materials Laws include, but are not limited to, the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., the Toxic Substance Control Act, 15 U.S.C. Section 2601, et seq., the Clean Water Act, 33 U.S.C. Section 1251, et seq., and the Hazardous Materials Transportation Act, 49 U.S.C. Section 5101, et seq., and their state analogs.

(i) "Impositions" and "Imposition Deposits" are defined in Section 7(a).

(j) "Improvements" means the buildings, structures, improvements, and alterations now constructed or at any time in the future constructed or placed upon the Land, including any future replacements and additions.

(k) "Indebtedness" means the principal of, interest on, and all other amounts due at any time under, the Note, this Instrument or any other Loan Document, including prepayment premiums, late charges, default interest, and advances as provided in Section 12 to protect the security of this Instrument.

(l) [Intentionally omitted]

(m) "Key Principal" means the natural person(s) or entity identified as such at the foot of this Instrument, and any person or entity who becomes a Key Principal after the date of this Instrument and is identified as such in an amendment or supplement to this Instrument.

(n) "Land" means the land described in Exhibit A.

(o) "Leases" means all present and future leases, subleases, licenses, concessions or grants or other possessory interests now or hereafter in force, whether oral or written, covering or affecting the Mortgaged Property, or any portion of the Mortgaged Property (including proprietary leases or occupancy agreements if Borrower is a cooperative housing corporation), and all modifications, extensions or renewals.

(p) "Lender" means the entity identified as "Lender" in the first paragraph of this Instrument and its successors and assigns, or any subsequent holder of the Note.

(q) "Loan Documents" means the Note, this Instrument, all guaranties, all indemnity agreements, all Collateral Agreements, O&M Programs, and any other documents now or in the future executed by Borrower, Key Principal, any guarantor or any other person in connection with the loan evidenced by the Note, as such documents may be amended from time to time.

(r) "Loan Servicer" means the entity that from time to time is designated by Lender to collect payments and deposits and receive notices under the Note, this Instrument and any other Loan Document, and otherwise to service the loan evidenced by the Note for the benefit of Lender.  Unless Borrower receives notice to the contrary, the Loan Servicer is the entity identified as "Lender" in the first paragraph of this Instrument.

(s) "Mortgaged Property" means all of Borrower's present and future right, title and interest in and to all of the following:

(1)

the Land;

(2)

the Improvements;

(3)

the Fixtures;

(4)

the Personalty;

(5)

all current and future rights, including air rights, development rights, zoning rights and other similar rights or interests, easements, tenements, rights-of-way, strips and gores of land, streets, alleys, roads, sewer rights, waters, watercourses, and appurtenances related to or benefitting the Land or the Improvements, or both, and all rights-of-way, streets, alleys and roads which may have been or may in the future be vacated;

(6)

all proceeds paid or to be paid by any insurer of the Land, the Improvements, the Fixtures, the Personalty or any other part of the Mortgaged Property, whether or not Borrower obtained the insurance pursuant to Lender’s requirement;

(7)

all awards, payments and other compensation made or to be made by any municipal, state or federal authority with respect to the Land, the Improvements, the Fixtures, the Personalty or any other part of the Mortgaged Property, including any awards or settlements resulting from condemnation proceedings or the total or partial taking of the Land, the Improvements, the Fixtures, the Personalty or any other part of the Mortgaged Property under the power of eminent domain or otherwise and including any conveyance in lieu thereof;

(8)

all contracts, options and other agreements for the sale of the Land, the Improvements, the Fixtures, the Personalty or any other part of the Mortgaged Property entered into by Borrower now or in the future, including cash or securities deposited to secure performance by parties of their obligations;

(9)

all proceeds from the conversion, voluntary or involuntary, of any of the above into cash or liquidated claims, and the right to collect such proceeds;

(10)

all Rents and Leases;

(11)

all earnings, royalties, accounts receivable, issues and profits from the Land, the Improvements or any other part of the Mortgaged Property, and all undisbursed proceeds of the loan secured by this Instrument and, if Borrower is a cooperative housing corporation, maintenance charges or assessments payable by shareholders or residents;

(12)

all Imposition Deposits;

(13)

all refunds or rebates of Impositions by any municipal, state or federal authority or insurance company (other than refunds applicable to periods before the real property tax year in which this Instrument is dated);

(14)

all tenant security deposits which have not been forfeited by any tenant under any Lease; and

(15)

all names under or by which any of the above Mortgaged Property may be operated or known, and all trademarks, trade names, and goodwill relating to any of the Mortgaged Property.

(t) "Note" means the Multifamily Note described on page 1 of this Instrument, including the Acknowledgment and Agreement of Key Principal to Personal Liability for Exceptions to Non-Recourse Liability (if any), and all schedules, riders, allonges and addenda, as such Multifamily Note may be amended from time to time.

(u) "O&M Program" is defined in Section 18(a).

(v) "Personalty" means all equipment, inventory, general intangibles which are used now or in the future in connection with the ownership, management or operation of the Land or the Improvements or are located on the Land or in the Improvements, including furniture, furnishings, machinery, building materials, appliances, goods, supplies, tools, books, records (whether in written or electronic form), computer equipment (hardware and software) and other tangible personal property (other than Fixtures) which are used now or in the future in connection with the ownership, management or operation of the Land or the Improvements or are located on the Land or in the Improvements, and any operating agreements relating to the Land or the Improvements, and any surveys, plans and specifications and contracts for architectural, engineering and construction services relating to the Land or the Improvements and all other intangible property and rights relating to the op eration of, or used in connection with, the Land or the Improvements, including all governmental permits relating to any activities on the Land.

(w) "Property Jurisdiction" is defined in Section 30(a).

(x) "Rents" means all rents (whether from residential or non-residential space), revenues and other income of the Land or the Improvements, including subsidy payments received from any sources (including, but not limited to payments under any Housing Assistance Payments Contract) parking fees, laundry and vending machine income and fees and charges for food, health care and other services provided at the Mortgaged Property, whether now due, past due, or to become due, and deposits forfeited by tenants.

(y) "Taxes" means all taxes, assessments, vault rentals and other charges, if any, general, special or otherwise, including all assessments for schools, public betterments and general or local improvements, which are levied, assessed or imposed by any public authority or quasi-public authority, and which, if not paid, will become a lien, on the Land or the Improvements.

(z) "Transfer" means (A) a sale, assignment, transfer or other disposition (whether voluntary, involuntary or by operation of law); (B) the granting, creating or attachment of a lien, encumbrance or security interest (whether voluntary, involuntary or by operation of law); (C) the issuance or other creation of an ownership interest in a legal entity, including a partnership interest, interest in a limited liability company or corporate stock; (D) the withdrawal, retirement, removal or involuntary resignation of a partner in a partnership or a member or manager in a limited liability company; or (E) the merger, dissolution, liquidation, or consolidation of a legal entity.  "Transfer" does not include (i) a conveyance of the Mortgaged Property at a judicial or non-judicial foreclosure sale under this Instrument or (ii) the Mortgaged Property becoming part of a bank ruptcy estate by operation of law under the United States Bankruptcy Code.  For purposes of defining the term "Transfer," the term "partnership" shall mean a general partnership, a limited partnership, a joint venture and a limited liability partnership, and the term "partner" shall mean a general partner, a limited partner and a joint venturer.

2. UNIFORM COMMERCIAL CODE SECURITY AGREEMENT. This Instrument is also a security agreement under the Uniform Commercial Code for any of the Mortgaged Property which, under applicable law, may be subject to a security interest under the Uniform Commercial Code, whether acquired now or in the future, and all products and cash and non-cash proceeds thereof (collectively, "UCC Collateral"), and Borrower hereby grants to Lender a security interest in the UCC Collateral.  Borrower hereby authorizes Lender to file financing statements, continuation statements and financing statement amendments, in such form as Lender may require to perfect or continue the perfection of this security interest and Borrower agrees, if Lender so requests, to execute and deliver to Lender such financing statements, continuation statements and amendments.  Borrower shall pay all filing costs and all costs and expenses of any record searches for financing statements that Lender may require.  Without the prior written consent of Lender, Borrower shall not create or permit to exist any other lien or security interest in any of the UCC Collateral.  If an Event of Default has occurred and is continuing, Lender shall have the remedies of a secured party under the Uniform Commercial Code, in addition to all remedies provided by this Instrument or existing under applicable law.  In exercising any remedies, Lender may exercise its remedies against the UCC Collateral separately or together, and in any order, without in any way affecting the availability of Lender's other remedies.  This Instrument constitutes a financing statement with respect to any part of the Mortgaged Property which is or may become a Fixture.

3. ASSIGNMENT OF RENTS; APPOINTMENT OF RECEIVER; LENDER IN POSSESSION.

(a) As part of the consideration for the Indebtedness, Borrower absolutely and unconditionally assigns and transfers to Lender all Rents. It is the intention of Borrower to establish a present, absolute and irrevocable transfer and assignment to Lender of all Rents and to authorize and empower Lender to collect and receive all Rents without the necessity of further action on the part of Borrower.  Promptly upon request by Lender, Borrower agrees to execute and deliver such further assignments as Lender may from time to time require.  Borrower and Lender intend this assignment of Rents to be immediately effective and to constitute an absolute present assignment and not an assignment for additional security only.  For purposes of giving effect to this absolute assignment of Rents, and for no other purpose, Rents shall not be deemed to be a part of the "Mortgaged Property," ; as that term is defined in Section 1(s).  However, if this present, absolute and unconditional assignment of Rents is not enforceable by its terms under the laws of the Property Jurisdiction, then the Rents shall be included as a part of the Mortgaged Property and it is the intention of the Borrower that in this circumstance this Instrument create and perfect a lien on Rents in favor of Lender, which lien shall be effective as of the date of this Instrument.

(b) After the occurrence of an Event of Default, Borrower authorizes Lender to collect, sue for and compromise Rents and directs each tenant of the Mortgaged Property to pay all Rents to, or as directed by, Lender, and Borrower shall, upon Borrower’s receipt of any Rents from any sources (including, but not limited to subsidy payments under any Housing Assistance Payments Contract), pay the total amount of such receipts to the Lender.  However, until the occurrence of an Event of Default, Lender hereby grants to Borrower a revocable license to collect and receive all Rents, to hold all Rents in trust for the benefit of Lender and to apply all Rents to pay the installments of interest and principal then due and payable under the Note and the other amounts then due and payable under the other Loan Documents, including Imposition Deposits, and to pay the current costs and expenses of man aging, operating and maintaining the Mortgaged Property, including utilities, Taxes and insurance premiums (to the extent not included in Imposition Deposits), tenant improvements and other capital expenditures.  So long as no Event of Default has occurred and is continuing, the Rents remaining after application pursuant to the preceding sentence may be retained by Borrower free and clear of, and released from, Lender's rights with respect to Rents under this Instrument.  From and after the occurrence of an Event of Default, and without the necessity of Lender entering upon and taking and maintaining control of the Mortgaged Property directly, or by a receiver, Borrower’s license to collect Rents shall automatically terminate and Lender shall without notice be entitled to all Rents as they become due and payable, including Rents then due and unpaid.  Borrower shall pay to Lender upon demand all Rents to which Lender is entitled.  At any time on or after the date of Lender’s dema nd for Rents, Lender may give, and Borrower hereby irrevocably authorizes Lender to give, notice to all tenants of the Mortgaged Property instructing them to pay all Rents to Lender, no tenant shall be obligated to inquire further as to the occurrence or continuance of an Event of Default, and no tenant shall be obligated to pay to Borrower any amounts which are actually paid to Lender in response to such a notice.  Any such notice by Lender shall be delivered to each tenant personally, by mail or by delivering such demand to each rental unit.  Borrower shall not interfere with and shall cooperate with Lender's collection of such Rents.

(c) Borrower represents and warrants to Lender that Borrower has not executed any prior assignment of Rents (other than an assignment of Rents securing indebtedness that will be paid off and discharged with the proceeds of the loan evidenced by the Note), that Borrower has not performed, and Borrower covenants and agrees that it will not perform, any acts and has not executed, and shall not execute, any instrument which would prevent Lender from exercising its rights under this Section 3, and that at the time of execution of this Instrument there has been no anticipation or prepayment of any Rents for more than two months prior to the due dates of such Rents.  Borrower shall not collect or accept payment of any Rents more than two months prior to the due dates of such Rents.

(d) If an Event of Default has occurred and is continuing, Lender may, regardless of the adequacy of Lender's security or the solvency of Borrower and even in the absence of waste, enter upon and take and maintain full control of the Mortgaged Property in order to perform all acts that Lender in its discretion determines to be necessary or desirable for the operation and maintenance of the Mortgaged Property, including the execution, cancellation or modification of Leases, the collection of all Rents, the making of repairs to the Mortgaged Property and the execution or termination of contracts providing for the management, operation or maintenance of the Mortgaged Property, for the purposes of enforcing the assignment of Rents pursuant to Section 3(a), protecting the Mortgaged Property or the security of this Instrument, or for such other purposes as Lender in its discretion may deem necessary or desirable.  Alternatively, if an Event of Default has occurred and is continuing, regardless of the adequacy of Lender's security, without regard to Borrower’s solvency and without the necessity of giving prior notice (oral or written) to Borrower, Lender may apply to any court having jurisdiction for the appointment of a receiver for the Mortgaged Property to take any or all of the actions set forth in the preceding sentence.  If Lender elects to seek the appointment of a receiver for the Mortgaged Property at any time after an Event of Default has occurred and is continuing, Borrower, by its execution of this Instrument, expressly consents to the appointment of such receiver, including the appointment of a receiver ex parte if permitted by applicable law.  Lender or the receiver, as the case may be, shall be entitled to receive a reasonable fee for managing the Mortgaged Property.  Immediately upon appointment of a receiver or immediately upon the Lender's entering upon a nd taking possession and control of the Mortgaged Property, Borrower shall surrender possession of the Mortgaged Property to Lender or the receiver, as the case may be, and shall deliver to Lender or the receiver, as the case may be, all documents, records (including records on electronic or magnetic media), accounts, surveys, plans, and specifications relating to the Mortgaged Property and all security deposits and prepaid Rents.  In the event Lender takes possession and control of the Mortgaged Property, Lender may exclude Borrower and its representatives from the Mortgaged Property.  Borrower acknowledges and agrees that the exercise by Lender of any of the rights conferred under this Section 3 shall not be construed to make Lender a mortgagee-in-possession of the Mortgaged Property so long as Lender has not itself entered into actual possession of the Land and Improvements.

(e) If Lender enters the Mortgaged Property, Lender shall be liable to account only to Borrower and only for those Rents actually received.  Lender shall not be liable to Borrower, anyone claiming under or through Borrower or anyone having an interest in the Mortgaged Property, by reason of any act or omission of Lender under this Section 3, and Borrower hereby releases and discharges Lender from any such liability to the fullest extent permitted by law.

(f) If the Rents are not sufficient to meet the costs of taking control of and managing the Mortgaged Property and collecting the Rents, any funds expended by Lender for such purposes shall become an additional part of the Indebtedness as provided in Section 12.

(g) Any entering upon and taking of control of the Mortgaged Property by Lender or the receiver, as the case may be, and any application of Rents as provided in this Instrument shall not cure or waive any Event of Default or invalidate any other right or remedy of Lender under applicable law or provided for in this Instrument.

4. ASSIGNMENT OF LEASES; LEASES AFFECTING THE MORTGAGED PROPERTY.

(a) As part of the consideration for the Indebtedness, Borrower absolutely and unconditionally assigns and transfers to Lender all of Borrower's right, title and interest in, to and under the Leases, including Borrower's right, power and authority to modify the terms of any such Lease, or extend or terminate any such Lease.   It is the intention of Borrower to establish a present, absolute and irrevocable transfer and assignment to Lender of all of Borrower’s right, title and interest in, to and under the Leases.  Borrower and Lender intend this assignment of the Leases to be immediately effective and to constitute an absolute present assignment and not an assignment for additional security only.  For purposes of giving effect to this absolute assignment of the Leases, and for no other purpose, the Leases shall not be deemed to be a part of the “Mortgaged Property, ” as that term is defined in Section 1(s).  However, if this present, absolute and unconditional assignment of the Leases is not enforceable by its terms under the laws of the Property Jurisdiction, then the Leases shall be included as a part of the Mortgaged Property and it is the intention of the Borrower that in this circumstance this Instrument create and perfect a lien on the Leases in favor of Lender, which lien shall be effective as of the date of this Instrument.

(b) Until Lender gives notice to Borrower of Lender's exercise of its rights under this Section 4, Borrower shall have all rights, power and authority granted to Borrower under any Lease (except as otherwise limited by this Section or any other provision of this Instrument), including the right, power and authority to modify the terms of any Lease or extend or terminate any Lease.  Upon the occurrence of an Event of Default, the permission given to Borrower pursuant to the preceding sentence to exercise all rights, power and authority under Leases shall automatically terminate.  Borrower shall comply with and observe Borrower's obligations under all Leases, including Borrower's obligations pertaining to the maintenance and disposition of tenant security deposits.

(c) Borrower acknowledges and agrees that the exercise by Lender, either directly or by a receiver, of any of the rights conferred under this Section 4 shall not be construed to make Lender a mortgagee-in-possession of the Mortgaged Property so long as Lender has not itself entered into actual possession of the Land and the Improvements.  The acceptance by Lender of the assignment of the Leases pursuant to Section 4(a) shall not at any time or in any event obligate Lender to take any action under this Instrument or to expend any money or to incur any expenses.  Lender shall not be liable in any way for any injury or damage to person or property sustained by any person or persons, firm or corporation in or about the Mortgaged Property.  Prior to Lender's actual entry into and taking possession of the Mortgaged Property, Lender shall not (i) be obligated to perform any of the terms, covenants and conditions contained in any Lease (or otherwise have any obligation with respect to any Lease); (ii) be obligated to appear in or defend any action or proceeding relating to the Lease or the Mortgaged Property; or (iii) be responsible for the operation, control, care, management or repair of the Mortgaged Property or any portion of the Mortgaged Property.  The execution of this Instrument by Borrower shall constitute conclusive evidence that all responsibility for the operation, control, care, management and repair of the Mortgaged Property is and shall be that of Borrower, prior to such actual entry and taking of possession.

(d) Upon delivery of notice by Lender to Borrower of Lender's exercise of Lender's rights under this Section 4 at any time after the occurrence of an Event of Default, and without the necessity of Lender entering upon and taking and maintaining control of the Mortgaged Property directly, by a receiver, or by any other manner or proceeding permitted by the laws of the Property Jurisdiction, Lender immediately shall have all rights, powers and authority granted to Borrower under any Lease, including the right, power and authority to modify the terms of any such Lease, or extend or terminate any such Lease.

(e) Borrower shall, promptly upon Lender's request, deliver to Lender an executed copy of each residential Lease then in effect. All Leases for residential dwelling units shall be on forms approved by Lender, shall be for initial terms of at least six months and not more than two years, and shall not include options to purchase.  If customary in the applicable market, residential Leases with terms of less than six months may be permitted with Lender's prior written consent.

(f) Borrower shall not lease any portion of the Mortgaged Property for non-residential use except with the prior written consent of Lender and Lender's prior written approval of the Lease agreement.  Borrower shall not modify the terms of, or extend or terminate, any Lease for non-residential use (including any Lease in existence on the date of this Instrument) without the prior written consent of Lender.  Borrower shall, without request by Lender, deliver an executed copy of each non-residential Lease to Lender promptly after such Lease is signed.   All non-residential Leases, including renewals or extensions of existing Leases, shall specifically provide that (1) such Leases are subordinate to the lien of this Instrument (unless waived in writing by Lender); (2) the tenant shall attorn to Lender and any purchaser at a foreclosure sale, such attornment to be self-executing and effective upon acquisition of title to the Mortgaged Property by any purchaser at a foreclosure sale or by Lender in any manner; (3) the tenant agrees to execute such further evidences of attornment as Lender or any purchaser at a foreclosure sale may from time to time request; (4) the Lease shall not be terminated by foreclosure or any other transfer of the Mortgaged Property; (5) after a foreclosure sale of the Mortgaged Property, Lender or any other purchaser at such foreclosure sale may, at Lender's or such purchaser's option, accept or terminate such Lease; and (6) the tenant shall, upon receipt after the occurrence of an Event of Default of a written request from Lender, pay all Rents payable under the Lease to Lender.

(g) Borrower shall not receive or accept Rent under any Lease (whether residential or non-residential) for more than two months in advance.

5. PAYMENT OF INDEBTEDNESS; PERFORMANCE UNDER LOAN DOCUMENTS; PREPAYMENT PREMIUM.  Borrower shall pay the Indebtedness when due in accordance with the terms of the Note and the other Loan Documents and shall perform, observe and comply with all other provisions of the Note and the other Loan Documents.  Borrower shall pay a prepayment premium in connection with certain prepayments of the Indebtedness, including a payment made after Lender's exercise of any right of acceleration of the Indebtedness, as provided in the Note.

6. EXCULPATION.  Borrower’s personal liability for payment of the Indebtedness and for performance of the other obligations to be performed by it under this Instrument is limited in the manner, and to the extent, provided in the Note.

7. DEPOSITS FOR TAXES, INSURANCE AND OTHER CHARGES.

(a) Borrower shall deposit with Lender on the day monthly installments of principal or interest, or both, are due under the Note (or on another day designated in writing by Lender), until the Indebtedness is paid in full, an additional amount sufficient to accumulate with Lender the entire sum required to pay, when due (1) any water and sewer charges which, if not paid, may result in a lien on all or any part of the Mortgaged Property, (2) the premiums for fire and other hazard insurance, rent loss insurance and such other insurance as Lender may require under Section 19, (3) Taxes, and (4) amounts for other charges and expenses which Lender at any time reasonably deems necessary to protect the Mortgaged Property, to prevent the imposition of liens on the Mortgaged Property, or otherwise to protect Lender's interests, all as reasonably estimated from time to time by Lender.  The amoun ts deposited under the preceding sentence are collectively referred to in this Instrument as the "Imposition Deposits".  The obligations of Borrower for which the Imposition Deposits are required are collectively referred to in this Instrument as "Impositions".  The amount of the Imposition Deposits shall be sufficient to enable Lender to pay each Imposition before the last date upon which such payment may be made without any penalty or interest charge being added.  Lender shall maintain records indicating how much of the monthly Imposition Deposits and how much of the aggregate Imposition Deposits held by Lender are held for the purpose of paying Taxes, insurance premiums and each other obligation of Borrower for which Imposition Deposits are required.  Any waiver by Lender of the requirement that Borrower remit Imposition Deposits to Lender may be revoked by Lender, in Lender's discretion, at any time upon notice to Borrower.

(b) Imposition Deposits shall be held in an institution (which may be Lender, if Lender is such an institution) whose deposits or accounts are insured or guaranteed by a federal agency.  Lender shall not be obligated to open additional accounts or deposit Imposition Deposits in additional institutions when the amount of the Imposition Deposits exceeds the maximum amount of the federal deposit insurance or guaranty.  Lender shall apply the Imposition Deposits to pay Impositions so long as no Event of Default has occurred and is continuing.  Unless applicable law requires, Lender shall not be required to pay Borrower any interest, earnings or profits on the Imposition Deposits.  Borrower hereby pledges and grants to Lender a security interest in the Imposition Deposits as additional security for all of Borrower's obligations under this Instrument and the other Loan Documents.  Any amounts deposited with Lender under this Section 7 shall not be trust funds, nor shall they operate to reduce the Indebtedness, unless applied by Lender for that purpose under Section 7(e).

(c) If Lender receives a bill or invoice for an Imposition, Lender shall pay the Imposition from the Imposition Deposits held by Lender.  Lender shall have no obligation to pay any Imposition to the extent it exceeds Imposition Deposits then held by Lender.  Lender may pay an Imposition according to any bill, statement or estimate from the appropriate public office or insurance company without inquiring into the accuracy of the bill, statement or estimate or into the validity of the Imposition.

(d) If at any time the amount of the Imposition Deposits held by Lender for payment of a specific Imposition exceeds the amount reasonably deemed necessary by Lender, the excess shall be credited against future installments of Imposition Deposits.  If at any time the amount of the Imposition Deposits held by Lender for payment of a specific Imposition is less than the amount reasonably estimated by Lender to be necessary, Borrower shall pay to Lender the amount of the deficiency within 15 days after notice from Lender.

(e) If an Event of Default has occurred and is continuing, Lender may apply any Imposition Deposits, in any amounts and in any order as Lender determines, in Lender's discretion, to pay any Impositions or as a credit against the Indebtedness. Upon payment in full of the Indebtedness, Lender shall refund to Borrower any Imposition Deposits held by Lender.

8. COLLATERAL AGREEMENTS.  Borrower shall deposit with Lender such amounts as may be required by any Collateral Agreement and shall perform all other obligations of Borrower under each Collateral Agreement.

9. APPLICATION OF PAYMENTS.  If at any time Lender receives, from Borrower or otherwise, any amount applicable to the Indebtedness which is less than all amounts due and payable at such time, then Lender may apply that payment to amounts then due and payable in any manner and in any order determined by Lender, in Lender's discretion.  Neither Lender's acceptance of an amount which is less than all amounts then due and payable nor Lender's application of such payment in the manner authorized shall constitute or be deemed to constitute either a waiver of the unpaid amounts or an accord and satisfaction.  Notwithstanding the application of any such amount to the Indebtedness,  Borrower’s obligations under this Instrument and the Note shall remain unchanged.

10. COMPLIANCE WITH LAWS.  Borrower shall comply with all laws, ordinances, regulations and requirements of any Governmental Authority and all recorded lawful covenants and agreements relating to or affecting the Mortgaged Property, including all laws, ordinances, regulations, requirements and covenants pertaining to health and safety, construction of improvements on the Mortgaged Property, fair housing, zoning and land use, and Leases.  Borrower also shall comply with all applicable laws that pertain to the maintenance and disposition of tenant security deposits.  Borrower shall at all times maintain records sufficient to demonstrate  compliance with the provisions of this Section 10.  Borrower shall take appropriate measures to prevent, and shall not engage in or knowingly permit, any illegal activities at the Mortgaged Property that could endanger tenants or visitors, result in damage to the Mortgaged Property, result in forfeiture of the Mortgaged Property, or otherwi se materially impair the lien created by this Instrument or Lender's interest in the Mortgaged Property.  Borrower represents and warrants to Lender that no portion of the Mortgaged Property has been or will be purchased with the proceeds of any illegal activity.

11. USE OF PROPERTY.  Unless required by applicable law, Borrower shall not (a) except for any change in use approved by Lender, allow changes in the use for which all or any part of the Mortgaged Property is being used at the time this Instrument was executed, (b) convert any individual dwelling units or common areas to commercial use, (c) initiate or acquiesce in a change in the zoning classification of the Mortgaged Property, or (d) establish any condominium or cooperative regime with respect to the Mortgaged Property.

12. PROTECTION OF LENDER'S SECURITY.

(a) If Borrower fails to perform any of its obligations under this Instrument or any other Loan Document, or if any action or proceeding is commenced which purports to affect the Mortgaged Property, Lender's security or Lender's rights under this Instrument, including eminent domain, insolvency, code enforcement, civil or criminal forfeiture, enforcement of Hazardous Materials Laws, fraudulent conveyance or reorganizations or proceedings involving a bankrupt or decedent, then Lender at Lender's option may make such appearances, disburse such sums and take such actions as Lender reasonably deems necessary to perform such obligations of Borrower and to protect Lender's interest, including (1) payment of fees and out-of-pocket expenses of attorneys, accountants, inspectors and consultants, (2) entry upon the Mortgaged Property to make repairs or secure the Mortgaged Property, (3) procurement of th e insurance required by Section 19, and (4) payment of amounts which Borrower has failed to pay under Sections 15 and 17.

(b) Any amounts disbursed by Lender under this Section 12, or under any other provision of this Instrument that treats such disbursement as being made under this Section 12, shall be added to, and become part of, the principal component of the Indebtedness, shall be immediately due and payable and shall bear interest from the date of disbursement until paid at the "Default Rate", as defined in the Note.

(c) Nothing in this Section 12 shall require Lender to incur any expense or take any action.

13. INSPECTION.  Lender, its agents, representatives, and designees may make or cause to be made entries upon and inspections of the Mortgaged Property (including environmental inspections and tests) during normal business hours, or at any other reasonable time.

14. BOOKS AND RECORDS; FINANCIAL REPORTING.

(a) Borrower shall keep and maintain at all times at the Mortgaged Property or the management agent's offices, and upon Lender's request shall make available at the Mortgaged Property, complete and accurate books of account and records (including copies of supporting bills and invoices) adequate to reflect correctly the operation of the Mortgaged Property, and copies of all written contracts, Leases, and other instruments which affect the Mortgaged Property.  The books, records, contracts, Leases and other instruments shall be subject to examination and inspection at any reasonable time by Lender.

(b) Borrower shall furnish to Lender all of the following:

(1)

within 120 days after the end of each fiscal year of Borrower, a statement of income and expenses for Borrower's operation of the Mortgaged Property for that fiscal year, a statement of changes in financial position of Borrower relating to the Mortgaged Property for that fiscal year and, when requested by Lender, a balance sheet showing all assets and liabilities of Borrower relating to the Mortgaged Property as of the end of that fiscal year;

(2)

within 120 days after the end of each fiscal year of Borrower, and at any other time upon Lender's request, a rent schedule for the Mortgaged Property showing the name of each tenant, and for each tenant, the space occupied, the lease expiration date, the rent payable for the current month, the date through which rent has been paid, and any related information requested by Lender;

(3)

within 120 days after the end of each fiscal year of Borrower, and at any other time upon Lender's request, an accounting of all security deposits held pursuant to all Leases, including the name of the institution (if any) and the names and identification numbers of the accounts (if any) in which such security deposits are held and the name of the person to contact at such financial institution, along with any authority or release necessary for Lender to access information regarding such accounts;

(4)

within 120 days after the end of each fiscal year of Borrower, and at any other time upon Lender's request, a statement that identifies all owners of any interest in Borrower and the interest held by each, if Borrower is a corporation, all officers and directors of Borrower, and if Borrower is a limited liability company, all managers who are not members;

(5)

upon Lender's request, a monthly property management report for the Mortgaged Property, showing the number of inquiries made and rental applications received from tenants or prospective tenants and deposits received from tenants and any other information requested by Lender;

(6)

upon Lender's request, a balance sheet, a statement of income and expenses for Borrower and a statement of changes in financial position of Borrower for Borrower's most recent fiscal year; and

(7)

if required by Lender, a statement of income and expense for the Mortgaged Property for the prior month or quarter.

(c) Each of the statements, schedules and reports required by Section 14(b) shall be certified to be complete and accurate by an individual having authority to bind Borrower, and shall be in such form and contain such detail as Lender may reasonably require.  Lender also may require that any statements, schedules or reports be audited at Borrower's expense by independent certified public accountants acceptable to Lender.

(d) If Borrower fails to provide in a timely manner the statements, schedules and reports required by Section 14(b), Lender shall have the right to have Borrower's books and records audited, at Borrower’s expense, by independent certified public accountants selected by Lender in order to obtain such statements, schedules and reports, and all related costs and expenses of Lender shall become immediately due and payable and shall become an additional part of the Indebtedness as provided in Section 12.

(e) If an Event of Default has occurred and is continuing, Borrower shall deliver to Lender upon written demand all books and records relating to the Mortgaged Property or its operation.

(f) Borrower authorizes Lender to obtain a credit report on Borrower at any time.

(g) If an Event of Default has occurred and Lender has not previously required Borrower to furnish a quarterly statement of income and expense for the Mortgaged Property, Lender may require Borrower to furnish such a statement within 45 days after the end of each fiscal quarter of Borrower following such Event of Default

15. TAXES; OPERATING EXPENSES.

(a) Subject to the provisions of Section 15(c) and Section 15(d), Borrower shall pay, or cause to be paid, all Taxes when due and before the addition of any interest, fine, penalty  or cost for nonpayment.

(b) Subject to the provisions of Section 15(c), Borrower shall pay the expenses of operating, managing, maintaining and repairing the Mortgaged Property (including insurance premiums, utilities, repairs and replacements) before the last date upon which each such payment may be made without any penalty or interest charge being added.

(c) As long as no Event of Default exists and Borrower has timely delivered to Lender any bills or premium notices that it has received, Borrower shall not be obligated to pay Taxes, insurance premiums or any other individual Imposition to the extent that sufficient Imposition Deposits are held by Lender for the purpose of paying that specific Imposition.  If an Event of Default exists, Lender may exercise any rights Lender may have with respect to Imposition Deposits without regard to whether Impositions are then due and payable.  Lender shall have no liability to Borrower for failing to pay any Impositions to the extent that any Event of Default has occurred and is continuing, insufficient Imposition Deposits are held by Lender at the time an Imposition becomes due and payable or Borrower has failed to provide Lender with bills and premium notices as provided above.

(d) Borrower, at its own expense, may contest by appropriate legal proceedings, conducted diligently and in good faith, the amount or validity of any Imposition other than insurance premiums, if (1) Borrower notifies Lender of the commencement or expected commencement of such proceedings, (2) the Mortgaged Property is not in danger of being sold or forfeited, (3) Borrower deposits with Lender reserves sufficient to pay the contested Imposition, if requested by Lender, and (4) Borrower furnishes whatever additional security is required in the proceedings or is reasonably requested by Lender, which may include the delivery to Lender of the reserves established by Borrower to pay the contested Imposition.

(e) Borrower shall promptly deliver to Lender a copy of all notices of, and invoices for, Impositions, and if Borrower pays any Imposition directly, Borrower shall promptly furnish to Lender receipts evidencing such payments.

16. LIENS; ENCUMBRANCES.  Borrower acknowledges that, to the extent provided in Section 21, the grant, creation or existence of any mortgage, deed of trust, deed to secure debt, security interest or other lien or encumbrance (a "Lien") on the Mortgaged Property (other than the lien of this Instrument) or on certain ownership interests in Borrower, whether voluntary, involuntary or by operation of law, and whether or not such Lien has priority over the lien of this Instrument, is a "Transfer" which constitutes an Event of Default.

17. PRESERVATION, MANAGEMENT AND MAINTENANCE OF MORTGAGED PROPERTY.

(a) Borrower (1) shall not commit waste or permit impairment or deterioration of the Mortgaged Property, (2) shall not abandon the Mortgaged Property, (3) shall restore or repair promptly, in a good and workmanlike manner, any damaged part of the Mortgaged Property to the equivalent of its original condition, or such other condition as Lender may approve in writing, whether or not insurance proceeds or condemnation awards are available to cover any costs of such restoration or repair, (4) shall keep the Mortgaged Property in good repair, including the replacement of Personalty and Fixtures with items of equal or better function and quality, (5) shall provide for professional management of the Mortgaged Property by a residential rental property manager satisfactory to Lender under a contract approved by Lender in writing, and (6) shall give notice to Lender of and, unless otherwise directed in w riting by Lender, shall appear in and defend any action or proceeding purporting to affect the Mortgaged Property, Lender's security or Lender's rights under this Instrument.  Borrower shall not (and shall not permit any tenant or other person to) remove, demolish or alter the Mortgaged Property or any part of the Mortgaged Property except in connection with the replacement of tangible Personalty.

(b) If, in connection with the making of the loan evidenced by the Note or at any later date, Lender waives in writing the requirement of Section 17(a)(5) above that Borrower enter into a written contract for management of the Mortgaged Property and if, after the date of this Instrument, Borrower intends to change the management of the Mortgaged Property, Lender shall have the right to approve such new property manager and the written contract for the management of the Mortgaged Property and require that Borrower and such new property manager enter into an Assignment of Management Agreement on a form approved by Lender.  If required by Lender (whether before or after an Event of Default), Borrower will cause any Affiliate of Borrower to whom fees are payable for the management of the Mortgaged Property to enter into an agreement with Lender, in a form approved by Lender, providing for subordination of those fees and such other provisions as Lender may require.  & quot;Affiliate of Borrower" means any corporation, partnership, joint venture, limited liability company, limited liability partnership, trust or individual controlled by, under common control with, or which controls Borrower (the term "control" for these purposes shall mean the ability, whether by the ownership of shares or other equity interests, by contract or otherwise, to elect a majority of the directors of a corporation, to make management decisions on behalf of, or independently to select the managing partner of, a partnership, or otherwise to have the power independently to remove and then select a majority of those individuals exercising managerial authority over an entity, and control shall be conclusively presumed in the case of the ownership of 50% or more of the equity interests).

18. ENVIRONMENTAL HAZARDS.

(a) Except for matters covered by a written program of operations and maintenance approved in writing by Lender (an "O&M Program") or matters described in Section 18(b), Borrower shall not cause or permit any of the following:

(1)

the presence, use, generation, release, treatment, processing, storage (including storage in above ground and underground storage tanks), handling, or disposal of any Hazardous Materials on or under the Mortgaged Property or any other  property of Borrower that is adjacent to the Mortgaged Property;

(2)

the transportation of any Hazardous Materials to, from, or across the Mortgaged Property;

(3)

any occurrence or condition on the Mortgaged Property or any other property of Borrower that is adjacent to the Mortgaged Property, which occurrence or condition is or may be in violation of Hazardous Materials Laws; or

(4)

any violation of or noncompliance with the terms of any Environmental Permit with respect to the Mortgaged Property or any  property of Borrower that is adjacent to the Mortgaged Property.

The matters described in clauses (1) through (4) above are referred to collectively in this Section 18 as "Prohibited Activities or Conditions".

(b) Prohibited Activities and Conditions shall not include the safe and lawful use and storage of quantities of (1) pre-packaged supplies, cleaning materials and petroleum products customarily used in the operation and maintenance of comparable multifamily properties, (2) cleaning materials, personal grooming items and other items sold in pre-packaged containers for consumer use and used by tenants and occupants of residential dwelling units in the Mortgaged Property; and (3) petroleum products used in the operation and maintenance of motor vehicles from time to time located on the Mortgaged Property’s parking areas, so long as all of the foregoing are used, stored, handled, transported and disposed of in compliance with Hazardous Materials Laws.

(c) Borrower shall take all commercially reasonable actions (including the inclusion of appropriate provisions in any Leases executed after the date of this Instrument) to prevent its employees, agents, and contractors, and all tenants and other occupants from causing or permitting any Prohibited Activities or Conditions.  Borrower shall not lease or allow the sublease or use of all or any portion of the Mortgaged Property to any tenant or subtenant for nonresidential use by any user that, in the ordinary course of its business, would cause or permit any Prohibited Activity or Condition.

(d) If an O&M Program has been established with respect to Hazardous Materials, Borrower shall comply in a timely manner with, and cause all employees, agents, and contractors of Borrower and any other persons present on the Mortgaged Property to comply with the O&M Program.  All costs of performance of Borrower's obligations under any O&M Program shall be paid by Borrower, and Lender's out-of-pocket costs incurred in connection with the monitoring and review of the O&M Program and Borrower's performance shall be paid by Borrower upon demand by Lender.  Any such out-of-pocket costs of Lender which Borrower fails to pay promptly shall become an additional part of the Indebtedness as provided in Section 12.

(e) Borrower represents and warrants to Lender that, except as previously disclosed by Borrower to Lender in writing:

(1)

Borrower has not at any time engaged in, caused or permitted any Prohibited Activities or Conditions;

(2)

to the best of Borrower's knowledge after reasonable and diligent inquiry, no Prohibited Activities or Conditions exist or have existed;

(3)

except to the extent previously disclosed by Borrower to Lender in writing, the Mortgaged Property does not now contain any underground storage tanks, and, to the best of Borrower’s knowledge after reasonable and diligent inquiry, the Mortgaged Property has not contained any underground storage tanks in the past.  If there is an underground storage tank located on the Property which has been previously disclosed by Borrower to Lender in writing, that tank complies with all requirements of Hazardous Materials Laws;

(4)

Borrower has complied with all Hazardous Materials Laws, including all requirements for notification regarding releases of Hazardous Materials.  Without limiting the generality of the foregoing, Borrower has obtained all Environmental Permits required for the operation of the Mortgaged Property in accordance with Hazardous Materials Laws now in effect and all such Environmental Permits are in full force and effect;  

(5)

no event has occurred with respect to the Mortgaged Property that constitutes, or with the passing of time or the giving of notice would constitute, noncompliance with the terms of any Environmental Permit;

(6)

there are no actions, suits, claims or proceedings pending or, to the best of Borrower’s knowledge after reasonable and diligent inquiry, threatened  that involve the Mortgaged Property and allege, arise out of, or relate to any Prohibited Activity or Condition; and

(7)

Borrower has not received any complaint, order, notice of violation or other communication from any Governmental Authority with regard to air emissions, water discharges, noise emissions or Hazardous Materials, or any other environmental, health or safety matters affecting the Mortgaged Property or any other property of Borrower that is adjacent to the Mortgaged Property.

The representations and warranties in this Section 18 shall be continuing representations and warranties that shall be deemed to be made by Borrower throughout the term of the loan evidenced by the Note, until the Indebtedness has been paid in full.

(f) Borrower shall promptly notify Lender in writing upon the occurrence of any of  the following events:

(1)

Borrower's discovery of any Prohibited Activity or Condition;

(2)

Borrower’s receipt of or knowledge of any complaint, order, notice of violation or other communication from any Governmental Authority or other person with regard to present or future alleged Prohibited Activities or Conditions or any other environmental, health or safety matters affecting the Mortgaged Property or any other property of Borrower that is adjacent to the Mortgaged Property; and  

(3)

any representation or warranty in this Section 18 becomes untrue after the date of this Agreement.

Any such notice given by Borrower shall not relieve Borrower of, or result in a waiver of, any obligation under this Instrument, the Note, or any other Loan Document.

(g) Borrower shall pay promptly the costs of any environmental inspections, tests or audits ("Environmental Inspections") required by Lender in connection with any foreclosure or deed in lieu of foreclosure, or as a condition of Lender’s consent to any Transfer under Section 21, or required by Lender following a reasonable determination by Lender that Prohibited Activities or Conditions may exist.  Any such costs incurred by Lender (including the fees and out-of-pocket costs of attorneys and technical consultants whether incurred in connection with any judicial or administrative process or otherwise) which Borrower fails to pay promptly shall become an additional part of the Indebtedness as provided in Section 12.  The results of all Environmental Inspections made by Lender shall at all times remain the property of Lender and Lender shall have no obligation to disclose or otherwise make available to Borrower or any other party such results or any other information obtained by Lender in connection with its Environmental Inspections.  Lender hereby reserves the right, and Borrower hereby expressly authorizes Lender, to make available to any party, including any prospective bidder at a foreclosure sale of the Mortgaged Property, the results of any Environmental Inspections made by Lender with respect to the Mortgaged Property.  Borrower consents to Lender notifying any party (either as part of a notice of sale or otherwise) of the results of any of Lender's Environmental Inspections.  Borrower acknowledges that Lender cannot control or otherwise assure the truthfulness or accuracy of the results of any of its Environmental Inspections and that the release of such results to prospective bidders at a foreclosure sale of the Mortgaged Property may have a material and adverse effect upon the amount which a party may bid at such sale.  Borrower agrees that Lender shall have no liability whatsoever as a result of delivering the results of any of its Environmental Inspections to any third party, and Borrower hereby releases and forever discharges Lender from any and all claims, damages, or causes of action, arising out of, connected with or incidental to the results of, the delivery of any of Lender's Environmental Inspections.

(h) If any investigation, site monitoring, containment, clean-up, restoration or other remedial work ("Remedial Work") is necessary to comply with any Hazardous Materials Law or order of any Governmental Authority that has or acquires jurisdiction over the Mortgaged Property or the use, operation or improvement of the Mortgaged Property under any Hazardous Materials Law, Borrower shall, by the earlier of (1) the applicable deadline required by Hazardous Materials Law or (2) 30 days after notice from Lender demanding such action, begin performing the Remedial Work, and thereafter diligently prosecute it to completion, and shall in any event complete the work by the time required by applicable Hazardous Materials Law.  If Borrower fails to begin on a timely basis or diligently prosecute any required Remedial Work, Lender may, at its option, cause the Remedial Work to be completed, in which case Borrower shall reimburse Lender on demand for the cost of doing so.  Any reimbursement due from Borrower to Lender shall become part of the Indebtedness as provided in Section 12.

(i) Borrower shall cooperate with any inquiry by any Governmental Authority and shall comply with any governmental or judicial order which arises from any alleged Prohibited Activity or Condition.

(j) Borrower shall indemnify, hold harmless and defend (i) Lender, (ii) any prior owner or holder of the Note, (iii) the Loan Servicer, (iv) any prior Loan Servicer, (v) the officers, directors, shareholders, partners, employees and trustees of any of the foregoing, and (vi) the heirs, legal representatives, successors and assigns of each of the foregoing (collectively, the "Indemnitees") from and against all proceedings, claims, damages, penalties and costs (whether initiated or sought by Governmental Authorities or private parties), including fees and out-of-pocket expenses of attorneys and expert witnesses, investigatory fees, and remediation costs, whether incurred in connection with any judicial or administrative process or otherwise, arising directly or indirectly from any of the following:

(1)

any breach of any representation or warranty of Borrower in this Section 18;  

(2)

any failure by Borrower to perform any of its obligations under this Section 18;

(3)

the existence or alleged existence of any Prohibited Activity or Condition;

(4)

the presence or alleged presence of Hazardous Materials on or under the Mortgaged Property or any property of Borrower that is adjacent to the Mortgaged Property; and

(5)

the actual or alleged violation of any Hazardous Materials Law.

(k) Counsel selected by Borrower to defend Indemnitees shall be subject to the  approval of those Indemnitees.  However, any Indemnitee may elect to defend any claim or legal or administrative proceeding at the Borrower’s expense.

(l) Borrower shall not, without the prior written consent of those Indemnitees who are named as parties to a claim or legal or administrative proceeding (a "Claim"), settle or compromise the Claim if the settlement (1) results in the entry of any judgment that does not include as an unconditional term the delivery by the claimant or plaintiff to Lender of a written release of those Indemnitees, satisfactory in form and substance to Lender; or (2) may materially and adversely affect Lender, as determined by Lender in its discretion.

(m) Lender agrees that the indemnity under this Section 18 shall be limited to the assets of Borrower and Lender shall not seek to recover any deficiency from any natural persons who are general partners of Borrower.

(n) Borrower shall, at its own cost and expense, do all of the following:

(1)

pay or satisfy any judgment or decree that may be entered against any Indemnitee or Indemnitees in any legal or administrative proceeding incident to any matters against which Indemnitees are entitled to be indemnified under this Section 18;

(2)

reimburse Indemnitees for any expenses paid or incurred in connection with any matters against which Indemnitees are entitled to be indemnified under this Section 18; and

(3)

reimburse Indemnitees for any and all expenses, including fees and out-of-pocket expenses of attorneys and expert witnesses, paid or incurred in connection with the enforcement by Indemnitees of their rights under this Section 18, or in monitoring and participating in any legal or administrative proceeding.

(o) In any circumstances in which the indemnity under this Section 18 applies, Lender may employ its own legal counsel and consultants to prosecute, defend or negotiate any claim or legal or administrative proceeding and Lender, with the prior written consent of Borrower (which shall not be unreasonably withheld, delayed or conditioned), may settle or compromise any action or legal or administrative proceeding.  Borrower shall reimburse Lender upon demand for all costs and expenses incurred by Lender, including all costs of settlements entered into in good faith, and the fees and out-of-pocket expenses of such attorneys and consultants.

(p) The provisions of this Section 18 shall be in addition to any and all other obligations and liabilities that Borrower may have  under applicable law or under other Loan Documents, and each Indemnitee shall be entitled to indemnification under this Section 18 without regard to whether Lender or that Indemnitee has exercised any rights against the Mortgaged Property or any other security, pursued any rights against any guarantor, or pursued any other rights available under the Loan Documents or applicable law. If Borrower consists of more than one person or entity, the obligation of those persons or entities to indemnify the Indemnitees under this Section 18 shall be joint and several. The obligation of Borrower to indemnify the Indemnitees under this Section 18 shall survive any repayment or discharge of the Indebtedness, any foreclosure proceeding, any foreclosure s ale, any delivery of any deed in lieu of foreclosure, and any release of record of the lien of this Instrument.

19. PROPERTY AND LIABILITY INSURANCE.

(a) Borrower shall keep the Improvements insured at all times against such hazards as Lender may from time to time require, which insurance shall include but not be limited to coverage against loss by fire and allied perils, general boiler and machinery coverage, and business income coverage.  Lender’s insurance requirements may change from time to time throughout the term of the Indebtedness.  If Lender so requires, such insurance shall also include sinkhole insurance, mine subsidence insurance, earthquake insurance, and, if the Mortgaged Property does not conform to applicable zoning or land use laws, building ordinance or law coverage.  If any of the Improvements is located in an area identified by the Federal Emergency Management Agency (or any successor to that agency) as an area having special flood hazards, and if flood insurance is available in that area, Borrower sh all insure such Improvements against loss by flood.

(b) All premiums on insurance policies required under Section 19(a) shall be paid in the manner provided in Section 7, unless Lender has designated in writing another method of payment.  All such policies shall also be in a form approved by Lender.  All policies of property damage insurance shall include a non-contributing, non-reporting mortgage clause in favor of, and in a form approved by, Lender.  Lender shall have the right to hold the original policies or duplicate original policies of all insurance required by Section 19(a).  Borrower shall promptly deliver to Lender a copy of all renewal and other notices received by Borrower with respect to the policies and all receipts for paid premiums.  At least 30 days prior to the expiration date of a policy, Borrower shall deliver to Lender the original  (or a duplicate original) of a renewal policy in form satisfactory to Lender.

(c) Borrower shall maintain at all times commercial general liability insurance, workers’ compensation insurance and such other liability, errors and omissions and fidelity insurance coverages as Lender may from time to time require.

(d) All insurance policies and renewals of insurance policies required by this Section 19 shall be in such amounts and for such periods as Lender may from time to time require, and shall be issued by insurance companies satisfactory to Lender.

(e) Borrower shall comply with all insurance requirements and shall not permit any condition to exist on the Mortgaged Property that would invalidate any part of any insurance coverage that this Instrument requires Borrower to maintain.

(f) In the event of loss, Borrower shall give immediate written notice to the insurance carrier and to Lender.  Borrower hereby authorizes and appoints Lender as attorney-in-fact for Borrower to make proof of loss, to adjust and compromise any claims under policies of property damage insurance, to appear in and prosecute any action arising from such property damage insurance policies, to collect and receive the proceeds of property damage insurance, and to deduct from such proceeds Lender’s expenses incurred in the collection of such proceeds.  This power of attorney is coupled with an interest and therefore is irrevocable.  However, nothing contained in this Section 19 shall require Lender to incur any expense or take any action.  Lender may, at Lender’s option, (1) hold the balance of such proceeds to be used to reimburse Borrower for the cost of restoring a nd repairing the Mortgaged Property to the equivalent of its original condition or to a condition approved by Lender (the "Restoration"), or (2) apply the balance of such proceeds to the payment of the Indebtedness, whether or not then due. To the extent Lender determines to apply insurance proceeds to Restoration, Lender shall do so in accordance with Lender’s then-current policies relating to the restoration of casualty damage on similar multifamily properties.

(g) Lender shall not exercise its option to apply insurance proceeds to the payment of the Indebtedness if all of the following conditions are met:  (1) no Event of Default (or any event which, with the giving of notice or the passage of time, or both, would constitute an Event of Default) has occurred and is continuing; (2) Lender determines, in its discretion, that there will be sufficient funds to complete the Restoration; (3) Lender determines, in its discretion, that the rental income from the Mortgaged Property after completion of the Restoration will be sufficient to meet all operating costs and other expenses, Imposition Deposits, deposits to reserves and loan repayment obligations relating to the Mortgaged Property; (4) Lender determines, in its discretion, that the Restoration will be completed before the earlier of (A) one year before the maturity date of the Note or (B) one year after the date of the loss or casualty; and (5) upon Lender's request, Borrowe r provides Lender evidence of the availability during and after the Restoration of the insurance required to be maintained by Borrower pursuant to this Section 19.

(h) If the Mortgaged Property is sold at a foreclosure sale or Lender acquires title to the Mortgaged Property, Lender shall automatically succeed to all rights of Borrower in and to any insurance policies and unearned insurance premiums and in and to the proceeds resulting from any damage to the Mortgaged Property prior to such sale or acquisition.

20. CONDEMNATION.

(a) Borrower shall promptly notify Lender of any action or proceeding relating to any condemnation or other taking, or conveyance in lieu thereof, of all or any part of the Mortgaged Property, whether direct or indirect (a "Condemnation").  Borrower shall appear in and prosecute or defend any action or proceeding relating to any Condemnation unless otherwise directed by Lender in writing.  Borrower authorizes and appoints Lender as attorney-in-fact for Borrower to commence, appear in and prosecute, in Lender’s or Borrower’s name, any action or proceeding relating to any Condemnation and to settle or compromise any claim in connection with any Condemnation.  This power of attorney is coupled with an interest and therefore is irrevocable.  However, nothing contained in this Section 20 shall require Lender to incur any expense or take any action.  Borrower hereby transfers and assigns to Lender all right, title and interest of Borrower in and to any award or payment with respect to (i) any Condemnation, or any conveyance in lieu of Condemnation, and (ii) any damage to the Mortgaged Property caused by governmental action that does not result in a Condemnation.

(b) Lender may apply such awards or proceeds, after the deduction of Lender’s expenses incurred in the collection of such amounts, at Lender’s option, to the restoration or repair of the Mortgaged Property or to the payment of the Indebtedness, with the balance, if any, to Borrower.  Unless Lender otherwise agrees in writing, any application of any awards or proceeds to the Indebtedness shall not extend or postpone the due date of any monthly installments referred to in the Note, Section 7 of this Instrument or any Collateral Agreement, or change the amount of such installments.  Borrower agrees to execute such further evidence of assignment of any awards or proceeds as Lender may require.

21. TRANSFERS OF THE MORTGAGED PROPERTY OR INTERESTS IN BORROWER.

(a) The occurrence of any of the following events shall constitute an Event of Default under this Instrument:

(1)

a Transfer of all or any part of the Mortgaged Property or any interest in the Mortgaged Property;

(2)

a Transfer of a Controlling Interest in Borrower;

(3)

a Transfer of a Controlling Interest in any entity which owns, directly or indirectly through one or more intermediate entities, a Controlling Interest in Borrower;

(4)

a Transfer of all or any part of Key Principal's ownership interests (other than limited partnership interests) in Borrower, or in any other entity which owns, directly or indirectly through one or more intermediate entities, an ownership interest in Borrower;

(5)

if Key Principal is an entity, (A) a Transfer of a Controlling Interest in Key Principal, or (B) a Transfer of a Controlling Interest in any entity which owns, directly or indirectly through one or more intermediate entities, a Controlling Interest in Key Principal;

(6)

if Borrower or Key Principal is a trust, the termination or revocation of such trust; and

(7)

a conversion of Borrower from one type of legal entity into another type of legal entity, whether or not there is a Transfer.

Lender shall not be required to demonstrate any actual impairment of its security or any increased risk of default in order to exercise any of its remedies with respect to an Event of Default under this Section 21.

(b) The occurrence of any of the following events shall not constitute an Event of Default under this Instrument, notwithstanding any provision of Section 21(a) to the contrary:

(1)

a Transfer to which Lender has consented;

(2)

a Transfer that occurs by devise, descent, or by operation of law upon the death of a natural person;

(3)

the grant of a leasehold interest in an individual dwelling unit for a term of two years or less not containing an option to purchase;

(4)

a Transfer of obsolete or worn out Personalty or Fixtures that are contemporaneously replaced by items of equal or better function and quality, which are free of liens, encumbrances and security interests other than those created by the Loan Documents or consented to by Lender;

(5)

the grant of an easement, if before the grant Lender determines that the easement will not materially affect the operation or value of the Mortgaged Property or Lender’s interest in the Mortgaged Property, and Borrower pays to Lender, upon demand, all costs and expenses incurred by Lender in connection with reviewing Borrower’s request; and

(6)

the creation of a tax lien or a mechanic’s, materialman’s or judgment lien against the Mortgaged Property which is bonded off, released of record or otherwise remedied to Lender’s satisfaction within 30 days of the date of creation.

(c) Lender shall consent, without any adjustment to the rate at which the Indebtedness secured by this Instrument bears interest or to any other economic terms of the Indebtedness, to a Transfer that would otherwise violate this Section 21 if, prior to the Transfer, Borrower has satisfied each of the following requirements:

(1)

the submission to Lender of all information required by Lender to make the determination required by this Section 21(c);

(2)

the absence of any Event of Default;

(3)

the transferee meets all of the eligibility, credit, management and other standards (including any standards with respect to previous relationships between Lender and the transferee and the organization of the transferee) customarily applied by Lender at the time of the proposed Transfer to the approval of borrowers in connection with the origination or purchase of similar mortgages, deeds of trust or deeds to secure debt on multifamily properties;

(4)

the Mortgaged Property, at the time of the proposed Transfer, meets all standards as to its physical condition that are customarily applied by Lender at the time of the proposed Transfer to the approval of properties in connection with the origination or purchase of similar mortgages on multifamily properties;

(5)

in the case of a Transfer of all or any part of the Mortgaged Property, or direct or indirect ownership interests in Borrower or Key Principal (if an entity), if transferor or any other person has obligations under any Loan Document, the execution by the transferee or one or more individuals or entities acceptable to Lender of an assumption agreement (including, if applicable, an Acknowledgement and Agreement of Key Principal to Personal Liability for Exceptions to Non-Recourse Liability) that is acceptable to Lender and that, among other things, requires the transferee to perform all obligations of transferor or such person set forth in such Loan Document, and may require that the transferee comply with any provisions of this Instrument or any other Loan Document which previously may have been waived by Lender;

(6)

if a guaranty has been executed and delivered in connection with the Note, this Instrument or any of the other Loan Documents, the Borrower causes one or more individuals or entities acceptable to Lender to execute and deliver to Lender a guaranty in a form acceptable to Lender; and

(7)

Lender’s receipt of all of the following:

(A)

a non-refundable review fee in the amount of $3,000 and a transfer fee equal to 1 percent of the outstanding Indebtedness immediately prior to the Transfer.

(B)

In addition, Borrower shall be required to reimburse Lender for all of Lender's out-of-pocket costs (including reasonable attorneys’ fees) incurred in reviewing the Transfer request, to the extent such expenses exceed $3,000.

(d) For purposes of this Section, the following terms shall have the meanings set forth below:

(1)

"Initial Owners" means, with respect to Borrower or any other entity, the persons or entities who on the date of the Note own in the aggregate 100% of the ownership interests in Borrower or that entity.

(2)

A Transfer of a "Controlling Interest" shall mean, with respect to any entity, the following:

(i)

if such entity is a general partnership or a joint venture, a Transfer of any general partnership interest or joint venture interest which would cause the Initial Owners to own less than 51% of all general partnership or joint venture interests in such entity;

(ii)

if such entity is a limited partnership, a Transfer of any general partnership interest;

(iii)

if such entity is a limited liability company or a limited liability partnership, a Transfer of any membership or other ownership interest which would cause the Initial Owners to own less than 51% of all membership or other ownership interests in such entity;

(iv)

if such entity is a corporation (other than a Publicly-Held Corporation) with only one class of voting stock, a Transfer of any voting stock which would cause the Initial Owners to own less than 51% of voting stock in such corporation;

(v)

if such entity is a corporation (other than a Publicly-Held Corporation) with more than one class of voting stock, a Transfer of any voting stock which would cause the Initial Owners to own less than a sufficient number of shares of voting stock having the power to elect the majority of directors of such corporation; and

(vi)

if such entity is a trust, the removal, appointment or substitution of a trustee of such trust other than (A) in the case of a land trust, or (B) if the trustee of such trust after such removal, appointment or substitution is a trustee identified in the trust agreement approved by Lender.

(3)

"Publicly-Held Corporation" shall mean a corporation the outstanding voting stock of which is registered under Section 12(b) or 12(g) of the Securities and Exchange Act of 1934, as amended.

22. EVENTS OF DEFAULT.  The occurrence of any one or more of the following shall constitute an Event of Default under this Instrument:

(a) any failure by Borrower to pay or deposit when due any amount required by the Note, this Instrument or any other Loan Document;

(b) any failure by Borrower to maintain the insurance coverage required by Section 19;

(c) any failure by Borrower to comply with the provisions of Section 33;

(d) fraud or material misrepresentation or material omission by Borrower, or any of its officers, directors, trustees, general partners or managers, Key Principal or any guarantor in connection with (A) the application for or creation of the Indebtedness, (B) any financial statement, rent roll, or other report or information provided to Lender during the term of the Indebtedness, or (C) any request for Lender’s consent to any proposed action, including a request for disbursement of funds under any Collateral Agreement;

(e) any Event of Default under Section 21;

(f) the commencement of a forfeiture action or proceeding, whether civil or criminal, which, in Lender’s reasonable judgment, could result in a forfeiture of the Mortgaged Property or otherwise materially impair the lien created by this Instrument or Lender’s interest in the Mortgaged Property;

(g) any failure by Borrower to perform any of its obligations under this Instrument (other than those specified in Sections 22(a) through (f)), as and when required, which continues for a period of 30 days after notice of such failure by Lender to Borrower, but no such notice or grace period shall apply in the case of any such failure which could, in Lender’s judgment, absent immediate exercise by Lender of a right or remedy under this Instrument, result in harm to Lender, impairment of the Note or this Instrument or any other security given under any other Loan Document;

(h) any failure by Borrower to perform any of its obligations as and when required under any Loan Document other than this Instrument which continues beyond the applicable cure period, if any, specified in that Loan Document; and

(i) any exercise by the holder of any other debt instrument secured by a mortgage, deed of trust or deed to secure debt on the Mortgaged Property of a right to declare all amounts due under that debt instrument immediately due and payable.

23. REMEDIES CUMULATIVE.  Each right and remedy provided in this Instrument is distinct from all other rights or remedies under this Instrument or any other Loan Document or afforded by applicable law, and each shall be cumulative and may be exercised concurrently, independently, or successively, in any order.

24. FORBEARANCE.

(a) Lender may (but shall not be obligated to) agree with Borrower, from time to time, and without giving notice to, or obtaining the consent of, or having any effect upon the obligations of, any guarantor or other third party obligor, to take any of the following actions:  extend the time for payment of all or any part of the Indebtedness; reduce the payments due under this Instrument, the Note, or any other Loan Document; release anyone liable for the payment of any amounts under this Instrument, the Note, or any other Loan Document; accept a renewal of the Note; modify the terms and time of payment of the Indebtedness; join in any extension or subordination agreement; release any Mortgaged Property; take or release other or additional security; modify the rate of interest or period of amortization of the Note or change the amount of the monthly installments payable under the Note; and otherwise modify this Instrument, the Note, or any other Loan Document.

(b) Any forbearance by Lender in exercising any right or remedy under the Note, this Instrument, or any other Loan Document or otherwise afforded by applicable law, shall not be a waiver of or preclude the exercise of any other right or remedy.  The acceptance by Lender of payment of all or any part of the Indebtedness after the due date of such payment, or in an amount which is less than the required payment, shall not be a waiver of Lender’s right to require prompt payment when due of all other payments on account of the Indebtedness or to exercise any remedies for any failure to make prompt payment. Enforcement by Lender of any security for the Indebtedness shall not constitute an election by Lender of remedies so as to preclude the exercise of any other right available to Lender.  Lender’s receipt of any awards or proceeds under Sections 19 and 20 shall not operate to cure or waive any Even t of Default.

25. LOAN CHARGES.  If any applicable law limiting the amount of interest or other charges permitted to be collected from Borrower is interpreted so that any charge provided for in any Loan Document, whether considered separately or together with other charges levied in connection with any other Loan Document, violates that law, and Borrower is entitled to the benefit of that law, that charge is hereby reduced to the extent necessary to eliminate that violation.  The amounts, if any, previously paid to Lender in excess of the permitted amounts shall be applied by Lender to reduce the principal of the Indebtedness.  For the purpose of determining whether any applicable law limiting the amount of interest or other charges permitted to be collected from Borrower has been violated, all Indebtedness which constitutes interest, as well as all other charges levied in connection with the Indebtedness which constitute interest, shall be deemed to be allocated and spread over the stated term of the Note.  Unless otherwise required by applicable law, such allocation and spreading shall be effected in such a manner that the rate of interest so computed is uniform throughout the stated term of the Note.

26. WAIVER OF STATUTE OF LIMITATIONS.  Borrower hereby waives the right to assert any statute of limitations as a bar to the enforcement of the lien of this Instrument or to any action brought to enforce any Loan Document.

27. WAIVER OF MARSHALLING. Notwithstanding the existence of any other security interests in the Mortgaged Property held by Lender or by any other party, Lender shall have the right to determine the order in which any or all of the Mortgaged Property shall be subjected to the remedies provided in this Instrument, the Note, any other Loan Document or applicable law.  Lender shall have the right to determine the order in which any or all portions of the Indebtedness are satisfied from the proceeds realized upon the exercise of such remedies.  Borrower and any party who now or in the future acquires a security interest in the Mortgaged Property and who has actual or constructive notice of this Instrument waives any and all right to require the marshalling of assets or to require that any of the Mortgaged Property be sold in the inverse order of alienation or that any of the Mortgaged Property be sold in parcels or as an entirety in connection with the exercise of any of the remedies permitted by applicable law or provided in this Instrument.

28. FURTHER ASSURANCES.  Borrower shall execute, acknowledge, and deliver, at its sole cost and expense, all further acts, deeds, conveyances, assignments, estoppel certificates, financing statements, transfers and assurances as Lender may require from time to time in order to better assure, grant, and convey to Lender the rights intended to be granted, now or in the future, to Lender under this Instrument and the Loan Documents.

29. ESTOPPEL CERTIFICATE.  Within 10 days after a request from Lender, Borrower shall deliver to Lender a written statement, signed and acknowledged by Borrower, certifying to Lender or any person designated by Lender, as of the date of such statement, (i) that the Loan Documents are unmodified and in full force and effect  (or, if there have been modifications, that the Loan Documents are in full force and effect as modified and setting forth such modifications); (ii) the unpaid principal balance of the Note; (iii) the date to which interest under the Note has been paid; (iv) that Borrower is not in default in paying the Indebtedness or in performing or observing any of the covenants or agreements contained in this Instrument or any of the other Loan Documents (or, if the Borrower is in default, describing such default in reasonable detail); (v) whether or not there are then existing any setoffs or defenses known to Borrower against the enforcement of any right o r remedy of Lender under the Loan Documents; and (vi) any additional facts requested by Lender.

30. GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE.

(a) This Instrument, and any Loan Document which does not itself expressly identify the law that is to apply to it, shall be governed by the laws of the jurisdiction in which the Land is located (the "Property Jurisdiction").

(b) Borrower agrees that any controversy arising under or in relation to the Note, this Instrument, or any other Loan Document shall be litigated exclusively in the Property Jurisdiction.  The state and federal courts and authorities with jurisdiction in the Property Jurisdiction shall have exclusive jurisdiction over all controversies which shall arise under or in relation to the Note, any security for the Indebtedness, or any other Loan Document.  Borrower irrevocably consents to service, jurisdiction, and venue of such courts for any such litigation and waives any other venue to which it might be entitled by virtue of domicile, habitual residence or otherwise.

31. NOTICE.

(a) All notices, demands and other communications ("notice") under or concerning this Instrument shall be in writing.  Each notice shall be addressed to the intended recipient at its address set forth in this Instrument, and shall be deemed given on the earliest to occur of (1) the date when the notice is received by the addressee; (2) the first Business Day after the notice is delivered to a recognized overnight courier service, with arrangements made for payment of charges for next Business Day delivery; or (3) the third Business Day after the notice is deposited in the United States mail with postage prepaid, certified mail, return receipt requested.  As used in this Section 31, the term "Business Day" means any day other than a Saturday, a Sunday or any other day on which Lender is not open for business.

(b) Any party to this Instrument may change the address to which notices intended for it are to be directed by means of notice given to the other party in accordance with this Section 31.  Each party agrees that it will not refuse or reject delivery of any notice given in accordance with this Section 31, that it will acknowledge, in writing, the receipt of any notice upon request by the other party and that any notice rejected or refused by it shall be deemed for purposes of this Section 31 to have been received by the rejecting party on the date so refused or rejected, as conclusively established by the records of the U.S. Postal Service or the courier service.

(c) Any notice under the Note and any other Loan Document which does not specify how notices are to be given shall be given in accordance with this Section 31.

32. SALE OF NOTE; CHANGE IN SERVICER.  The Note or a partial interest in the Note (together with this Instrument and the other Loan Documents) may be sold one or more times without prior notice to Borrower.  A sale may result in a change of the Loan Servicer.  There also may be one or more changes of the Loan Servicer unrelated to a sale of the Note.  If there is a change of the Loan Servicer, Borrower will be given notice of the change.

33. SINGLE ASSET BORROWER.   Until the Indebtedness is paid in full, Borrower (a) shall not acquire any real or personal property other than the Mortgaged Property and personal property related to the operation and maintenance of the Mortgaged Property;  (b) shall not operate any business other than the management and operation of the Mortgaged Property; and (c) shall not maintain its assets in a way difficult to segregate and identify.

34. SUCCESSORS AND ASSIGNS BOUND.  This Instrument shall bind, and the rights granted by this Instrument shall inure to, the respective successors and assigns of Lender and Borrower.  However, a Transfer not permitted by Section 21 shall be an Event of Default.

35. JOINT AND SEVERAL LIABILITY.  If more than one person or entity signs this Instrument as Borrower, the obligations of such persons and entities shall be joint and several.

36. RELATIONSHIP OF PARTIES; NO THIRD PARTY BENEFICIARY.

(a) The relationship between Lender and Borrower shall be solely that of creditor and debtor, respectively, and nothing contained in this Instrument shall create any other relationship between Lender and Borrower.

(b) No creditor of any party to this Instrument and no other person shall be a third party beneficiary of this Instrument or any other Loan Document.  Without limiting the generality of the preceding sentence, (1) any arrangement (a "Servicing Arrangement") between the Lender and any Loan Servicer for loss sharing or interim advancement of funds shall constitute a contractual obligation of such Loan Servicer that is independent of the obligation of Borrower for the payment of the Indebtedness, (2) Borrower shall not be a third party beneficiary of any Servicing Arrangement, and (3) no payment by the Loan Servicer under any Servicing Arrangement will reduce the amount of the Indebtedness.

37. SEVERABILITY; AMENDMENTS.  The invalidity or unenforceability of any provision of this Instrument shall not affect the validity or enforceability of any other provision, and all other provisions shall remain in full force and effect.  This Instrument contains the entire agreement among the parties as to the rights granted and the obligations assumed in this Instrument.  This Instrument may not be amended or modified except by a writing signed by the party against whom enforcement is sought.

38. CONSTRUCTION.  The captions and headings of the sections of this Instrument are for convenience only and shall be disregarded in construing this Instrument.  Any reference in this Instrument to an "Exhibit" or a "Section" shall, unless otherwise explicitly provided, be construed as referring, respectively, to an Exhibit attached to this Instrument or to a Section of this Instrument.  All Exhibits attached to or referred to in this Instrument are incorporated by reference into this Instrument.  Any reference in this Instrument to a statute or regulation shall be construed as referring to that statute or regulation as amended from time to time.  Use of the singular in this Agreement includes the plural and use of the plural includes the singular.  As used in this Instrument, the term "including" means "including, but not limited to."

39. LOAN SERVICING.  All actions regarding the servicing of the loan evidenced by the Note, including the collection of payments, the giving and receipt of notice, inspections of the Property, inspections of books and records, and the granting of consents and approvals, may be taken by the Loan Servicer unless Borrower receives notice to the contrary.  If Borrower receives conflicting notices regarding the identity of the Loan Servicer or any other subject, any such notice from Lender shall govern.

40. DISCLOSURE OF INFORMATION.  Lender may furnish information regarding Borrower or the Mortgaged Property to third parties with an existing or prospective interest in the servicing, enforcement, evaluation, performance, purchase or securitization of the Indebtedness, including trustees, master servicers, special servicers, rating agencies, and organizations maintaining databases on the underwriting and performance of multifamily mortgage loans.  Borrower irrevocably waives any and all rights it may have under applicable law to prohibit such disclosure, including any right of privacy.

41. NO CHANGE IN FACTS OR CIRCUMSTANCES.  All information in the application for the loan submitted to Lender (the "Loan Application") and in all financial statements, rent rolls, reports, certificates and other documents submitted in connection with the Loan Application are complete and accurate in all material respects.  There has been no material adverse change in any fact or circumstance that would make any such information incomplete or inaccurate.

42. SUBROGATION.  If, and to the extent that, the proceeds of the loan evidenced by the Note are used to pay, satisfy or discharge any obligation of Borrower for the payment of money that is secured by a pre-existing mortgage, deed of trust or other lien encumbering the Mortgaged Property (a "Prior Lien"), such loan proceeds shall be deemed to have been advanced by Lender at Borrower’s request, and Lender shall automatically, and without further action on its part, be subrogated to the rights, including lien priority, of the owner or holder of the obligation secured by the Prior Lien, whether or not the Prior Lien is released.

43. ACCELERATION; REMEDIES.  At any time during the existence of an Event of Default, Lender, at Lender's option, may declare the Indebtedness to be immediately due and payable without further demand, and may invoke the power of sale and any other remedies permitted by applicable law or provided in this Instrument or in any other Loan Document.  Borrower acknowledges that the power of sale granted in this Instrument may be exercised by Lender without prior judicial hearing.  Borrower has the right to bring an action to assert the non-existence of an Event of Default or any other defense of Borrower to acceleration and sale.  Lender shall be entitled to collect all costs and expenses incurred in pursuing such remedies, including attorneys' fees, costs of documentary evidence, abstracts and title reports.

If the power of sale is invoked, Trustee shall record a notice of default in each county in which the Mortgaged Property is located and shall mail copies of such notice in the manner prescribed by applicable law to Borrower and to the other persons prescribed by applicable law.  Trustee shall give notice of sale and Trustee shall sell the Mortgaged Property according to the laws of Nebraska.  Trustee may sell the Mortgaged Property at the time and place and under the terms designated in the notice of sale in one or more parcels and in such order as Trustee may determine.  Trustee may postpone sale of all or any part of the Mortgaged Property by public announcement at the time and place of any previously scheduled sale.  Lender or Lender's designee may purchase the Mortgaged Property at any sale.

Trustee shall deliver to the purchaser at the sale, within a reasonable time after the sale, a Trustee's deed conveying the Mortgaged Property so sold without any covenant or warranty, express or implied.  The recitals in Trustee's deed shall be prima facie evidence of the truth of the statements made therein.  Trustee shall apply the proceeds of the sale in the following order: (a) to all costs and expenses of the sale, including Trustee's fees of not more than 5% of the gross sale price, attorneys' fees and costs of title evidence; (b) to the Indebtedness in such order as Lender, in Lender's discretion, directs; and (c) the excess, if any, to the person or persons legally entitled thereto.

44. RECONVEYANCE.  Upon payment of the Indebtedness, Lender shall request Trustee to reconvey the Mortgaged Property and shall surrender this Instrument and the Note to Trustee.  Trustee shall reconvey the Mortgaged Property without warranty to the person or persons legally entitled thereto.  Such person or persons shall pay Trustee's reasonable costs incurred in so reconveying the Mortgaged Property.

45. SUBSTITUTE TRUSTEE.  Lender, at Lender's option, may from time to time remove Trustee and appoint a successor trustee to any Trustee appointed under this Instrument by an instrument recorded in the county in which this Instrument is recorded.  Without conveyance of the Mortgaged Property, the successor trustee shall succeed to all the title, power and duties conferred upon the Trustee herein and by applicable law.

46. REQUEST FOR NOTICES.  Borrower requests that copies of the notice of default and notice of sale be sent to Borrower at Borrower's address stated in the first paragraph on page 1 of this Instrument.

47. WAIVER OF TRIAL BY JURY.  BORROWER AND LENDER EACH (A) COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS INSTRUMENT OR THE RELATIONSHIP BETWEEN THE PARTIES AS BORROWER AND LENDER THAT IS TRIABLE OF RIGHT BY A JURY AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO SUCH ISSUE TO THE EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN THE FUTURE.  THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL.

ATTACHED EXHIBITS.  The following Exhibits are attached to this Instrument:

X	Exhibit A	Description of the Land (required)
X	Exhibit B	Modifications to Instrument

IN WITNESS WHEREOF, Borrower has signed and delivered this Instrument or has caused this Instrument to be signed and delivered by its duly authorized representative.

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VMS NATIONAL PROPERTIES, an Illinois joint venture general partnership

By:  VMS National Residential Portfolio I, an Illinois limited partnership, its joint venture partner

By:  Maeril, Inc., a Delaware corporation, its general partner

By: /s/Patti K. Fielding

Patti K. Fielding

Executive Vice President and Treasurer

By:  VMS National Residential Portfolio II, an Illinois limited partnership, its joint venture partner

By:  Maeril, Inc., a Delaware corporation, its general partner

By: /s/Patti K. Fielding

Patti K. Fielding

Executive Vice President and Treasurer

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EXHIBIT A

[DESCRIPTION OF THE LAND]

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EXHIBIT B

Modifications to Security Instrument

The following modifications are made to the text of the Instrument that precedes this Exhibit:

1.

Paragraph 7 is amended to add the following subparagraph:

(f)

Notwithstanding the provisions of Subparagraph 7(a), Lender will not require Borrower to deposit with Lender amounts sufficient to accumulate with Lender the entire sum required to pay Taxes, provided that Borrower delivers to Lender a letter of credit and opinion of the letter of credit issuer’s counsel, both in form and content satisfactory to Lender in its sole discretion, in an amount equal to one (1) year’s Taxes.  In the event that Borrower does not timely pay Taxes or fails to provide Lender with proof of such payment, Lender shall have the right to (i) cash the letter of credit and apply the proceeds of the same to the payment of Taxes, (ii) deposit any proceeds in excess of the amount of Taxes then due and payable into Lender’s account for Imposition Deposits and (iii) require Borrower to deposit with Lender Imposition Deposits as provided in Subpar agraph 7(a).

2.

Paragraph 18(a) is amended to add the following sections:

(5)

the presence of any form of toxic mold or fungus in the Mortgaged Property of a type which may pose a significant risk to human health or the environment or would negatively impact the value of the Mortgaged Property (collectively “Mold”);

(6)

any activity, condition, event or omission that causes the growth of Mold on or in the Mortgaged Property.

3.

The defined term “Prohibited Activities or Conditions” is amended to include the matters described in Sections 18(a)(5) and 18(a)(6).

4.

A new Section 21(a)(8) is added as follows:

(8)

if, at any time, AIMCO REIT loses the authority or the ownership interests necessary to control, either directly or indirectly, Borrower and Guarantor and Borrower’s and Grantor’s Controlling Entities (“AIMCO Authorization”), Grantor covenants to send notice of such loss of AIMCO Authorization to Lender within fifteen (15) business days.  Such loss of AIMCO Authorization, shall be deemed a Transfer hereunder, and such Transfer shall constitute an Event of Default under Section 21(a) unless AIMCO REIT regains such AIMCO Authorization within sixty (60) days after the date of the loss.

5.

Section 33 is amended by adding the following sentences at the end of such Section:

“Borrower has disclosed to and provided Lender with information relating to assets it currently owns in addition to the Mortgaged Property (the “Disclosed Assets”).  Lender acknowledges that Borrower is not a single asset entity and agrees that Borrower may continue to own and operate the Disclosed Assets until September 30, 2007.  Until the Indebtedness is paid in full, Borrower (a) shall not acquire any real or personal property other than (i) the Mortgaged Property, (ii) the Disclosed Assets, (iii) personal

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property related to the operation and maintenance of the Mortgaged Property and the Disclosed Assets, and (iv) personal property and residences used primarily for the personal use of the Borrower and their family; (b) shall not operate any business other than the management and operation of the Mortgaged Property and the Disclosed Assets; (c) shall not maintain its assets in a way which is difficult to segregate and identify and (d) grant, create or permit the existence of any new or additional mortgage, deed of trust, deed to secure debt or other lien encumbrance on any of the Disclosed Assets, the Mortgaged Property or ownership interest in the Borrower, whether voluntary, involuntary or by operation of law.  In the event the Property shall be transferred, the single asset requirements of the original Section 33 of this Instrument sha ll apply for any transferee.”

6.

The following new Section is added at the end of the Instrument after the last numbered Section, but there are no Sections between the last numbered Section and Section 55:

“55.  CONVEYANCE.

No later than September 30, 2007, Borrower shall convey all of its interest in the Mortgaged Property (the “Conveyance”) to a Lender-approved, single-asset, single purpose entity.  Failure to complete the Conveyance shall constitute an event of default under Section 22 of the Security Instrument.

The documents evidencing the Conveyance shall be submitted to Lender for review prior to the Conveyance, and shall be in form and substance satisfactory to Lender.  Borrower agrees to pay all costs incurred in connection with the Conveyance; including, without limitation, the legal fees, if any, of Lender’s attorneys in connection with the required review and approval and the endorsement to the Lender’s title insurance policy.

Completion of the Conveyance shall be evidenced by submission to Lender of the recorded conveyance documents and an endorsement to the Lender’s title insurance policy.

It is understood that no transfer or application fee shall be due in connection with the Conveyance, and that the Conveyance shall not be deemed to violate Section 21 of the Security Instrument respecting Transfers.”

7.

AIMCO STANDARD.

A.

Section 1(v) is modified to read as follows:

(v)

"Personalty" means all furniture, furnishings, equipment, machinery, building materials, appliances, goods, supplies, tools, books, records (whether in written or electronic form), computer equipment (hardware and software) and other tangible personal property (other than Fixtures) which are used now or in the future exclusively in connection with the ownership, management or operation of the Land or the Improvements or are located on the Land or in the Improvements, and any operating agreements relating to the Land or the Improvements, and any surveys, plans and specifications and contracts for architectural, engineering and construction services relating to the Land or the Improvements and all other intangible property and rights exclusively relating to the operation of, or used exclusively in

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connection with, the Land or the Improvements including all governmental permits relating to any activities on the Land.

B.

Section 7(c) is modified to read as follows:

(c)

Notwithstanding the provisions of  Section 7(a), Lender will not require Borrower to deposit with Lender amounts sufficient to accumulate with Lender the entire sum required to pay the water and sewer charges, fire, hazard or other insurance premiums, and ground rents.  At least annually, Borrower must provide Lender with proof of payment of all such Impositions for which Lender is not collecting Imposition Deposits.  In the event that Borrower does not timely pay any of the Impositions, or fails to provide Lender with proof of such payment, or upon the occurrence of an Event of Default hereunder, or upon Borrower’s failure to maintain the Mortgaged Property in a satisfactory manner in accordance with the requirements of this Instrument, then in any such events, Lender may require Borrower to deposit with Lender the Imposition Deposits as provided in Section 7(a).

C.

Except in a case where Lender in its discretion determines that an emergency exists, Lender may take actions specified in Section 12(a) only if Lender has notified Borrower of Borrower's failure to perform any of its obligations under this Instrument or any other Loan Document and Borrower does not cure the failure within ten (10) days after such notice.  If Lender so determines that an emergency exists, Lender shall notify Borrower of the action taken within ten (10) days after the action is taken.

D.

Sections 14(b)(4) and 14(b)(5) are modified to read as follows:

(4)

within 120 days after the end of each fiscal year of Borrower, and at any other time upon Lender's request, a statement that identifies all owners of any interest in Borrower and each general partner in Borrower, and confirming that the ownership of each other Controlling Entity has not changed in a manner that violates Section 21(a);

(5)

promptly following Lender's request, quarterly or monthly income and expense statements for the Property relating to a quarterly or monthly period, as the case may be, ending no later than 45 days before the request;

E.

For purposes of Section 14(b), Borrower shall be deemed to have delivered any statement or document "upon Lender's request" if Borrower has delivered the document promptly following Lender's request.

F.

Notwithstanding Section (14)(c), unless an Event of Default has occurred and is continuing, or Lender has determined that an event having a Material Adverse Effect has occurred, Lender may require that the financial statements required by Sections 14(b)(1), 14(b)(2) and 14(b)(3) be audited, but may not require that any other financial statements required by Section 14 be audited.  Certification of a statement by the chief financial officer of the entity that is the subject of the statement or, in the case of a partnership, the chief

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financial officer of the general partner, will be acceptable to Lender as certification by an individual having authority to bind Borrower.

G.

Lender shall not have Borrower's books and records audited pursuant to Section 14(d) unless Lender has given Borrower notice specifying the statements, schedules and reports required by Section 14(b) that Borrower has failed to provide, and Borrower has not provided such statements by the expiration of ten days after such notice.

H.

So long as Borrower is contesting the amount and validity of any Imposition other than insurance premiums diligently and in good faith as described in Section 15(d) and all of the conditions specified in clauses (1) through (4) of Section 15(d) are satisfied, Lender will refrain from applying Imposition Deposits to payment of the contested Imposition.

I.

Section 15(e) and Section 16 are modified to read as follows:

15(e)

Borrower shall promptly deliver to Lender a copy of all notices of, and invoices for Impositions, and if Borrower pays any Imposition directly (which Borrower has no obligation to do unless Imposition Deposits have been waived or are insufficient and Lender has notified Borrower of that insufficiency), Borrower shall promptly furnish to Lender receipts evidencing such payments.

16.

LIENS; ENCUMBRANCES.  Borrower acknowledges that, to the extent provided in Section 21, the grant, creation or existence of any mortgage, deed of trust, deed to secure debt, security interest or other lien or encumbrance (a “Lien”) on the Mortgaged Property (other than the lien of this Instrument), or on certain ownership interests in Borrower, whether voluntary, involuntary or by operation of law, and whether or not such lien has priority over the lien of this Instrument, is a “Transfer” which constitutes an Event of Default.

J.

For purposes of Section 18(b), "pre-packaged supplies, cleaning materials and petroleum products customarily used in the operation and maintenance of comparable multifamily properties" shall include, without limitation, pool, spa, maintenance and gardening materials.

K.

The second sentence of Section 18(c) is modified to read as follows:

Borrower shall not lease or allow the sublease or use of all or any portion of the Mortgaged Property to any tenant or subtenant for nonresidential use by any user that, in the ordinary course of its business, would be reasonably expected to cause or permit any Prohibited Activity or Condition.

L.

For purposes of Section 18(d), Borrower shall only be obligated to pay out-of-pocket expenses incurred by Lender in connection with the monitoring and review of an O&M Program and Borrower's performance to the extent such expenses are reasonable.

M.

Borrower's representation and warranty in Section 18(e)(4) regarding requirements for notification regarding releases of Hazardous Materials shall relate only to such releases, if any, at or affecting the Mortgaged Property.

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N.

Section 18(e)(5) is modified to read as follows:

(5)

no event has occurred with respect to the Mortgaged Property that constitutes, or with the passing of time or the giving of notice would reasonably be expected to constitute, noncompliance with the terms of any Environmental Permit;

O.

Section 18(g) is modified to read as follows:

(g)

Borrower shall pay promptly the costs of any environmental inspections, tests or audits ("Environmental Inspections") required by Lender in connection with or in preparation for any foreclosure or deed in lieu of foreclosure.  Borrower shall also pay promptly the reasonable costs of any Environmental Inspections required by Lender in connection with, or as a condition of Lender's consent to any Transfer under Section 21, or required by Lender following a reasonable determination by Lender that Prohibited Activities or Conditions may exist.  Any such costs incurred by Lender (including the fees and out-of-pocket costs of attorneys and technical consultants whether incurred in connection with any judicial or administrative process or otherwise) which Borrower fails to pay promptly shall become an additional part of the Indebte dness as provided in Section 12. The results of all Environmental Inspections made by Lender in connection with or in preparation for any foreclosure or deed in lieu of foreclosure shall at all times remain the property of Lender and Lender shall have no obligation to disclose such results to or otherwise make such results available to Borrower or any other party.  Lender will make available to Borrower the results of all other Environmental Inspections made by Lender.  Lender hereby reserves the right, and Borrower hereby expressly authorizes Lender, to make available to any party, including any prospective bidder at a foreclosure sale of the Mortgaged Property, the results of any Environmental Inspections made by Lender with respect to the Mortgaged Property.  Borrower consents to Lender notifying any party (either as part of a notice of sale or otherwise) of the results of any of Lender's Environmental Inspections.  Except in the case of an Environmental Inspection performed in connect ion with a foreclosure or deed in lieu of foreclosure, or a disclosure of Environmental Inspection results that Lender is required by law to make, Lender shall notify Borrower of its intention to disclose such information and shall give Borrower ten days to provide supplemental information, explanations or corrections to accompany the disclosure. Borrower acknowledges that Lender cannot control or otherwise assure the truthfulness or accuracy of the results of any of its Environmental Inspections and that the release of such results to prospective bidders at a foreclosure sale of the Mortgaged Property may have a material and adverse effect upon the amount which a party may bid at such sale.  Borrower agrees that Lender shall have no liability whatsoever as a result of delivering the results of any of its Environmental Inspections to any third party, and Borrower hereby releases and forever discharges Lender from any and all claims, damages, or causes of

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action, arising, out of, connected with or incidental to the results of, the delivery of any of Lender's Environmental Inspections.

P.

Lender shall not commence Remedial Work under the second sentence of Section 18(h) unless Lender has given Borrower notice of its intention to do so and Borrower has not begun performing the Remedial Work within 10 days after such notice.

Q.

The following sentence is added at the end of Section 18(j):

However, Borrower shall have no obligation to indemnify any of the foregoing parties to the extent that the proceedings, claims, damages, penalties or costs arise out of the gross negligence or willful misconduct of Lender, any prior owner or holder of the Note, the Loan Servicer or any prior Loan Servicer.

R.

For purposes of Section 19(b), Lender will accept a duplicate original of any insurance policy.

S.

For purposes of Section 19(d), an insurance company will be acceptable to Lender if it has a rating in Best's Key Rating Guide of at least "A-" and a financial size category of at least “v,” provided that if Fannie Mae changes its requirements for the financial rating of insurers generally, Lender may change the requirement set forth in this sentence in a manner consistent with any such change.

T.

Clause (2) of Section 19(g) is modified to read as follows:

(2)

Lender determines, in its discretion, that the combination of insurance proceeds and amounts provided by the Borrower will be sufficient to complete the Restoration.

U.

For purposes of Section 19(h), Lender shall automatically succeed to rights of Borrower in and to insurance policies and unearned premiums only to the extent permitted by the applicable policies and insurance companies.

V.

Section 21(a)(2) is modified to read as follows:

(2)

if Borrower is a joint venture general partnership, a Transfer of (A) any general partnership interest (except for a Transfer to a Qualified REIT Subsidiary, as defined in Section 856(i)(2) of the Internal Revenue Code of 1986, 100% owned by Apartment Investment and Management Company, a Maryland corporation or to a Qualified REIT Subsidiary, as defined in Section 856 (l)(1) of the Internal Revenue Code of 1986, 100% owned by AIMCO OP), or (B) other interests in Borrower that would cause the Initial Owners of Borrower to own less than 51% of all partnership interests in Borrower;

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W.

New Sections 21(b)(7), 21(b)(8), 21(b)(9), and 21(b)(10) are added, as follows:

(7)

The Transfer of any joint venture partnership interests in Borrower provided no Change of Control occurs as a result of such Transfer.

(8)

The Transfer of shares of common stock, limited partnership interests or other beneficial or ownership interests or other forms of securities in AIMCO REIT or AIMCO OP, and the issuance of all varieties of convertible debt, equity and other similar securities of AIMCO REIT or AIMCO OP, and the subsequent Transfer of such securities; provided, however, that no Change of Control occurs as a result of such Transfer, either upon such Transfer or upon the subsequent conversion to equity of such convertible debt or other securities.

(9)

The issuance by AIMCO REIT or AIMCO OP of additional common stock, limited partnership interests or other beneficial or ownership interests, convertible debt, equity and other similar securities, and the subsequent Transfer of such convertible debt or securities; provided, however, that no Change of Control occurs as the result of such Transfer, either upon such Transfer or upon the subsequent conversion to equity of such convertible debt or other securities.

(10)

So long as AIMCO REIT owns 100% of the stock of AIMCO-LP, Inc., a Transfer of limited partnership interests that results in AIMCO-LP, Inc. owning not less than 50.1% of the limited partnership interests in AIMCO OP.

X.

Section 21(b)(8) shall apply only to a Transfer of an interest in a Controlling Entity that is prohibited by Section 21(a)(7).

Y.

A new Section 21(d) is added, as follows:

(d)

For purposes of this Section 21, the following terms shall be defined as follows:

(1)

"Change of Control" shall mean the earliest to occur of (A) the date an Acquiring Person becomes (by acquisition, consolidation, merger or otherwise), directly or indirectly, the beneficial owner of more than forty percent (40%) of the total Voting Equity Capital of AIMCO REIT then outstanding, or (B) the date on which AIMCO REIT shall cease to hold (whether directly or indirectly through a wholly owned intermediary entity such as AIMCO-LP, Inc. or AIMCO-GP, Inc.) at least 50.1% of the limited partnership interests in AIMCO OP, or (C) the date on which AIMCO REIT shall cease for any reason to hold (whether directly or indirectly) (i) the interests in the Joint Venture Partners held as of the

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date of this Instrument (as evidenced by organizational charts and documents submitted to Lender as of such date) and (ii) the Controlling Interest(s) in the Borrower, or (D) the replacement (other than solely by reason of retirement at age sixty-five or older, death or disability) of more than 50% (or such lesser percentage as is required for decisionmaking by the board of directors of trustees, if applicable) of the members of the board of directors (or trustee, if applicable) of AIMCO REIT over a one-year period where such replacement shall not have been approved by a vote of at least a majority of the board of directors (or trustees, if applicable) of AIMCO REIT then still in office who either were members of such board of directors (or trustees, if applicable) at the beginning of such one year period or whose electi on as members of the board of directors (or trustees, if applicable) was previously so approved.

(2)

"Acquiring Person" shall mean a "person" or group of "persons" within the meaning of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended.  However, notwithstanding the foregoing, “Acquiring Person” shall not be deemed to include any member of the Borrower Control Group unless such member has, directly or indirectly, disposed of, sold or otherwise transferred to, or encumbered or restricted (whether by means of voting trust agreement or otherwise) for the benefit of an Acquiring Person, all or any portion of the Voting Equity Capital of AIMCO REIT directly or indirectly owned or controlled by such member or such member directly or indirectly votes all or any portion of the Voting Equity Capital of AIMCO REIT, directly or indirectly, owned or controlled by such member for the taking of any action which, direc tly or indirectly constitutes or would result in a Change of Control, in which event such member of the Borrower Control Group shall be deemed to constitute an Acquiring Person to the extent of the Voting Equity Capital of AIMCO REIT owned or controlled by such member.

(3)

"Borrower Control Group" shall mean Terry Considine, Peter K. Kompaniez, Richard S. Ellwood, J. Landis Martin, Thomas L. Rhodes and James N. Bailey.

(4)

A "Person" shall mean an individual, an estate, a trust, a corporation, a partnership, a limited liability company or any other organization or entity (whether governmental or private).

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(5)

"Security" shall have the same meaning as in Section 2(1) of the Securities Act of 1933, as amended.

(6)

"Controlling Interest(s)" shall mean (i) with respect to a partnership, such majority and/or managing general partner interests which, together with a majority of limited partnership interests if necessary for consent purposes, vest in the holder of such interests the sole power, right and authority to control the day to day operations of the Borrower; including, without limitation, the authority to manage, operate and finance the Mortgaged Property, (ii) with respect to a corporation, the number of shares which entitle the holder to elect a majority of the board of directors of the Borrower, and (iii) with respect to a limited liability company, such majority and/or managing member interests as vest in the holder of such interests the sole power, right and authority to control the day to day operations of the Borrower; including, without limitation, the authority to manage, operate and finance the Mortgaged Property.

(7)

"AIMCO REIT" shall mean Apartment Investment and Management Company, a corporation organized and existing under the laws of the State of Maryland.

(8)

"AIMCO OP" shall mean AIMCO Properties, L.P., a limited partnership organized and existing under the laws of the State of Delaware.

(9)

"Joint Venture Partners" shall mean the entities executing this Instrument on behalf of the Borrower and/or its successors or assigns in interest.

(10)

“Voting Equity Capital” shall mean Securities of any class or classes, the holders of which are ordinarily, in the absence of contingencies, entitled to elect a majority of the board of directors (or Persons performing similar functions).

V.

Section 22(a) is modified to read as follows:

(a)

any failure by Borrower to pay or deposit (i) any Imposition Deposit within three days after it is due, or (ii) any other amount required by the Note, this Instrument, or any other Loan Document when due.

W.

Section 28 shall obligate Borrower to provide such further assurances as Lender reasonably may require.

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X.

The words "Except as otherwise disclosed to Lender in writing, before the date of this Instrument" are added at the beginning of the second sentence of Section 41.

Y.

Section 37 is modified by adding: “; provided, however, that in the event of a Transfer, any or some or all of the Modifications to Instrument set forth in Exhibit B (if any) may be modified or rendered void by Lender at Lender’s option by notice to Borrower/transferee”.  The modifications set forth in this Exhibit B shall be null and void unless title to the Mortgaged Property is vested in an entity whose Controlling Interest(s) are directly or indirectly held by AIMCO REIT or AIMCO OP.

INITIALS

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EX-10

EXHIBIT 10.62

Terrace Garden Apartments

MULTIFAMILY NOTE

(VARIABLE LOAN)

US $4,536,348.00

As of January 18, 2007

FOR VALUE RECEIVED, the undersigned (“Borrower”) promises to pay to the order of CAPMARK FINANCE INC., a California corporation, the principal sum of Four Million Five Hundred Thirty-Six Thousand Three Hundred Forty-Eight and 00/100 Dollars (US $4,536,348.00), with interest on each Variable Loan at an annual rate as calculated in Section 3 hereof.

This Note is executed and delivered by Borrower pursuant to one of either (i) that certain Amended and Restated Loan Agreement, dated as of September 16, 2002, by and among certain borrowers signatory thereto and Lender or (ii) that certain Loan Agreement dated as of November 1, 2002, by and among certain borrowers signatory thereto and Lender.  As used herein, the term “Loan Agreement” shall mean whichever of the loan agreements described in the preceding sentence shall apply from time to time in accordance with their respective terms, along with all amendments, supplements, replacements, restatements or other modifications thereto or thereof from time to time made.  The Loan Agreement shall evidence the obligation of Borrower to repay a Variable Loan made by Lender to Borrower in accordance with the terms of the Loan Agreement.  This Note is entitled to the benef it and security of the Loan Documents provided for in the Loan Agreement, to which reference is hereby made for a statement of all of the terms and conditions under which the Variable Loan evidenced hereby is made.  The Loan Agreement requires certain of the terms of each Variable Loan to be evidenced by one or a series of Loan Confirmation Instruments, and reference is hereby made to each such Loan Confirmation Instrument for such terms.

1.

Defined Terms.  As used in this Note, (i) the term “Lender” means the holder of this Note, and (ii) the term “Indebtedness” means the principal of, interest on, or any other amounts due at any time under, this Note, the Security Instrument or any other Loan Document, including prepayment premiums, late charges, default interest, and advances to protect the security of the Security Instrument under Section 12 of the Security Instrument.  Event of Default and other capitalized terms used but not defined in this Note shall have the meanings given to such terms in the Loan Agreement or, if not defined in the Loan Agreement, as defined in the Security Instrument (as defined in Paragraph 5).

2.

Address for Payment.  All payments due under this Note shall be payable at Capmark Finance Inc., 116 Welsh Road, Horsham, PA  19044 , Attention:  Servicing – Account Manager, or such other place as may be designated by written notice to Borrower from or on behalf of Lender.

3.

Payment of Principal and Interest.  Principal and interest shall be paid as follows:

(a)

This Note shall evidence a Variable Loan made from time to time under the Loan Agreement.  The Variable Loan shall bear interest at a rate determined in accordance with Section 2.01 of the Loan Agreement.

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(b)

Borrower shall pay imputed interest on each Variable Loan in advance in the form of a Discount in accordance with Section 1.04(b) of the Loan Agreement (except that Borrower shall pay actual interest on the Variable Loan for the partial month period, if any, in accordance with Section 1.04(a) of the Loan Agreement).  

(c)

Borrower shall make monthly payments of principal each in the amount as set forth on the attached Amortization Schedule.  Lender shall apply each such principal payment to the outstanding principal amount of the Loan on the Rollover Date next following receipt of any such payment.  If not sooner paid, the entire principal amount of the Variable Loan shall be due and payable on the earlier of (i) the termination of the Loan Agreement pursuant to subsection (e) of Section 1.02 thereof, (ii) the fifth anniversary (unless such date is extended pursuant to Section 1.07 of the Loan Agreement, in which case, the tenth anniversary) of the Initial Closing Date or (iii) the maturity date of any outstanding MBS, unless either (A) not less than five Business Days prior to the maturity date of the outstanding MBS, a Borrower has requested that the outstanding MBS be renewed wi th a new MBS or converted to a Fixed Loan to take effect on the maturity date of the outstanding MBS and such new MBS has been issued or conversion has occurred or (B) the MBS is automatically renewed, which automatic renewal shall occur in the event that a Borrower does not make the request set forth in subpart (iii)(A) above and does not give Lender notice not less than five Business days prior to the maturity date of the outstanding MBS that the Variable Loan related to such outstanding MBS shall be paid on the maturity date of such outstanding MBS (the “Maturity Date”).  Any MBS that is issued as a result of an automatic renewal of a maturing MBS as contemplated by subpart (iii)(B) above shall have a maturity date of three (3) months after the MBS Issue Date.  

(d)

In addition to payment of principal and the Discount, Borrower shall pay the Variable Loan Fee due on each Variable Loan in accordance with Section 1.04(b)(ii) of the Loan Agreement.

4.

Application of Payments.  If at any time Lender receives, from Borrower or otherwise, any amount applicable to the Indebtedness that is less than all amounts due and payable at such time, Lender may apply that payment to amounts then due and payable in any manner and in any order determined by Lender, in Lender’s discretion.  Borrower agrees that neither Lender’s acceptance of a payment from Borrower in an amount that is less than all amounts then due and payable nor Lender’s application of such payment shall constitute or be deemed to constitute either a waiver of the unpaid amounts or an accord and satisfaction.

5.

Security.  The Indebtedness is secured, among other things, by a multifamily mortgage, deed to secure debt or deed of trust dated as of the date of this Note (the “Security Instrument”) and reference is made to the Security Instrument for other rights of Lender concerning the collateral for the Indebtedness.

6.

Acceleration.  If an Event of Default has occurred and is continuing, the entire unpaid principal balance, any accrued interest, the prepayment premium payable under Paragraph 10, if any, and all other amounts payable under this Note and any other Loan Document shall at once become due and payable, at the option of Lender, without any additional notice to Borrower.  Lender may exercise this option to accelerate regardless of any prior forbearance.

7.

Late Charge.  If any monthly amount payable under this Note or under the Security Instrument or any other Loan Document is not received by Lender within 10 days after the amount is due, Borrower shall pay to Lender, immediately and without demand by Lender, a late charge equal to 5 percent of such amount.  Borrower acknowledges that its failure to make timely payments will cause Lender to incur additional expenses in servicing and processing the loan evidenced by this Note (the “Loan”), and that it is extremely difficult and impractical to determine those additional expenses.  Borrower agrees that the late charge payable pursuant to

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this Paragraph represents a fair and reasonable estimate, taking into account all circumstances existing on the date of this Note, of the additional expenses Lender will incur by reason of such late payment.  The late charge is payable in addition to, and not in lieu of, any interest payable at the Default Rate pursuant to Paragraph 8.

8.

Default Rate.  So long as any monthly installment or any other payment due under this Note remains past due for 30 days or more, interest under this Note shall accrue on the unpaid principal balance from the earlier of the due date of the first unpaid monthly installment or other payment due, as applicable, at a rate (the “Default Rate”) equal to the lesser of 4 percentage points above the rate stated in the first paragraph of this Note or the maximum interest rate which may be collected from Borrower under applicable law.  If the unpaid principal balance and all accrued interest are not paid in full on the Maturity Date, the unpaid principal balance and all accrued interest shall bear interest from the Maturity Date at the Default Rate.  Borrower also acknowledges that its failure to make timely payments will cause Lender to incur additional expenses in s ervicing and processing the Loan, that, during the time that any monthly installment or payment under this Note is delinquent for more than 30 days, Lender will incur additional costs and expenses arising from its loss of the use of the money due and from the adverse impact on Lender’s ability to meet its other obligations and to take advantage of other investment opportunities, and that it is extremely difficult and impractical to determine those additional costs and expenses.  Borrower also acknowledges that, during the time that any monthly installment or payment due under this Note is delinquent for more than 30 days, Lender’s risk of nonpayment of this Note will be materially increased and Lender is entitled to be compensated for such increased risk.  Borrower agrees that the increase in the rate of interest payable under this Note to the Default Rate represents a fair and reasonable estimate, taking into account all circumstances existing on the date of this Note, of the additional costs and expenses Lender will incur by reason of Borrower’s delinquent payment and the additional compensation Lender is entitled to receive for the increased risks of nonpayment associated with a delinquent loan.

9.

Limits on Personal Liability.

(a)

Except as otherwise provided in this Paragraph 9, Borrower shall have no personal liability under this Note, the Security Instrument or any other Loan Document for the repayment of the Indebtedness or for the performance of any other obligations of Borrower under the Loan Documents, and Lender’s only recourse for the satisfaction of the Indebtedness and the performance of such obligations shall be Lender’s exercise of its rights and remedies with respect to the Mortgaged Property and any other collateral held by Lender as security for the Indebtedness.  This limitation on Borrower’s liability shall not limit or impair Lender’s enforcement of its rights against any guarantor of the Indebtedness or any guarantor of any obligations of Borrower.

(b)

Borrower shall be personally liable to Lender for the repayment of a portion of the Indebtedness equal to any loss or damage suffered by Lender as a result of (1) failure of Borrower to pay to Lender upon demand after an Event of Default, all Rents to which Lender is entitled under Section 3(a) of the Security Instrument and the amount of all security deposits collected by Borrower from tenants then in residence; (2) failure of Borrower to apply all insurance proceeds and condemnation proceeds as required by the Security Instrument; (3) failure of Borrower to comply with Section 14(d) or (e) of the Security Instrument relating to the delivery of books and records, statements, schedules and reports; (4)  fraud or written material misrepresentation by Borrower or any officer, director, partner, member or employee of Borrower in connection with the application for or creation of the Indebtedn ess or any request for any action or consent by Lender; or (5) failure to apply Rents, first, to the payment of reasonable operating expenses (other than Property management fees that are not currently payable pursuant to the terms of an Assignment of Management Agreement or any other agreement with Lender executed in connection with the Loan) and then to amounts  (“Debt

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Service Amounts”) payable under this Note, the Security Instrument or any other Loan Document (except that Borrower will not be personally liable (i) to the extent that Borrower lacks the legal right to direct the disbursement of such sums because of a bankruptcy, receivership or similar judicial proceeding, or (ii) with respect to Rents that are distributed in any calendar year if Borrower has paid all operating expenses and Debt Service Amounts for that calendar year).

(c)

Borrower shall become personally liable to Lender for the repayment of all of the Indebtedness upon the occurrence of any of the following Events of Default: (1) Borrower’s acquisition of any property or operation of any business not permitted by Section 33 of the Security Instrument; or (2) a Transfer that is an Event of Default under Section 21 of the Security Instrument.

(d)

To the extent that Borrower has personal liability under this Paragraph 9, Lender may exercise its rights against Borrower personally without regard to whether Lender has exercised any rights against the Mortgaged Property or any other security, or pursued any rights against any guarantor, or pursued any other rights available to Lender under this Note, the Security Instrument, any other Loan Document or applicable law. For purposes of this Paragraph 9, the term “Mortgaged Property” shall not include any funds that (1) have been applied by Borrower as required or permitted by the Security Instrument prior to the occurrence of an Event of Default, or (2) Borrower was unable to apply as required or permitted by the Security Instrument because of a bankruptcy, receivership, or similar judicial proceeding.

10.

Voluntary and Involuntary Prepayments.  Pursuant to the terms of the Loan Agreement, Borrower shall pay the entire amount of the Discount on any Variable Loan in advance.  Accordingly, any Variable Loan may be prepaid in whole or in part and at any time without penalty.  Borrower shall give Lender six (6) Business Days advance notice of any prepayment.

11.

Costs and Expenses.  Borrower shall pay on demand all reasonable expenses and costs, including reasonable fees and out-of-pocket expenses of attorneys and expert witnesses and costs of investigation, incurred by Lender as a result of any default under this Note or in connection with efforts to collect any amount due under this Note, or to enforce the provisions of any of the other Loan Documents, including those incurred in post-judgment collection efforts and in any bankruptcy proceeding (including any action for relief from the automatic stay of any bankruptcy proceeding) or judicial or non-judicial foreclosure proceeding.

12.

Forbearance.  Any forbearance by Lender in exercising any right or remedy under this Note, the Security Instrument, or any other Loan Document or otherwise afforded by applicable law, shall not be a waiver of or preclude the exercise of that or any other right or remedy.  The acceptance by Lender of any payment after the due date of such payment, or in an amount which is less than the required payment, shall not be a waiver of Lender’s right to require prompt payment when due of all other payments or to exercise any right or remedy with respect to any failure to make prompt payment.  Enforcement by Lender of any security for Borrower’s obligations under this Note shall not constitute an election by Lender of remedies so as to preclude the exercise of any other right or remedy available to Lender.

13.

Waivers.  Except as expressly provided in the Loan Agreement, presentment, demand, notice of dishonor, protest, notice of acceleration, notice of intent to demand or accelerate payment or maturity, presentment for payment, notice of nonpayment, grace, and diligence in collecting the Indebtedness are waived by Borrower and all endorsers and guarantors of this Note and all other third party obligors.

14.

Loan Charges.  If any applicable law limiting the amount of interest or other charges permitted to be collected from Borrower in connection with the Loan is interpreted so

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that any interest or other charge provided for in any Loan Document, whether considered separately or together with other charges provided for in any other Loan Document, violates that law, and Borrower is entitled to the benefit of that law, that interest or charge is hereby reduced to the extent necessary to eliminate that violation.  Borrower agrees to an effective rate of interest that is the stated rate of interest plus any additional rate of interest resulting from any other charges or fees that are to be paid by Borrower to Lender that may be found by a court of competent jurisdiction to be interest.  The amounts, if any, previously paid to Lender in excess of the permitted amounts shall be applied by Lender to reduce the unpaid principal balance of this Note.  For the purpose of determining whether any applicable law limiting the amount of intere st or other charges permitted to be collected from Borrower has been violated, all Indebtedness that constitutes interest, as well as all other charges made in connection with the Indebtedness that constitute interest, shall be deemed to be allocated and spread ratably over the stated term of the Note.  Unless otherwise required by applicable law, such allocation and spreading shall be effected in such a manner that the rate of interest so computed is uniform throughout the stated term of the Note.

15.

Commercial Purpose.  Borrower represents that the Indebtedness is being incurred by Borrower solely for the purpose of carrying on a business or commercial enterprise, and not for personal, family or household purposes.

16.

Counting of Days.  Except where otherwise specifically provided, any reference in this Note to a period of “days” means calendar days, not Business Days.

17.

Governing Law; Consent to Jurisdiction; WAIVER OF JURY TRIAL.  The provisions of Section 11.07 of the Loan Agreement (entitled “Choice of Law; Consent to Jurisdiction; Waiver of Jury Trial”) are hereby incorporated into this Note by this reference to the fullest extent as if the text of such Section were set forth in its entirety herein.

18.

Captions.  The captions of the paragraphs of this Note are for convenience only and shall be disregarded in construing this Note.

19.

Notices.  All notices, demands and other communications required or permitted to be given by Lender to Borrower pursuant to this Note shall be given in accordance with Section 11.09 of the Loan Agreement.

20.

Security for this Note.  Reference is made hereby to the Loan Agreement and the Security Documents for additional rights and remedies of Lender relating to the indebtedness evidenced by this Note.  Each Security Document shall be released in accordance with the provisions of the Security Documents.

21.

Loan May Not Be Reborrowed.  Borrower may not re-borrow any amounts under this Note which it has previously borrowed and repaid under this Note.

22.

Default Under Loan Agreement and Other Loan Documents.  The occurrence of an Event of Default under the Loan Agreement or the Security Instrument shall constitute an “Event of Default” under this Note in accordance with the Loan Agreement and the Security Instrument.  Upon the occurrence of an Event of Default under the Loan Agreement or the Security Instrument, the entire principal amount outstanding hereunder and accrued interest thereon shall at once become due and payable, at the option of the holder hereof.

23.

Loan Confirmation Instruments; Accounting for Variable Loans.  The terms of the Loan Agreement and this Note govern the repayment, and all other terms relating to the Variable Loan.  However, Borrower shall execute a Loan Confirmation Instrument to create a physical instrument evidencing each MBS issued to fund the Variable Loan.  The Loan Confirmation Instrument executed by Borrower in accordance with Section 2.02 of the Loan

-5-

Agreement shall set forth the amount, term, Discount, Closing Date and certain other terms of each MBS issued to fund the Variable Loan.  The Loan Confirmation Instrument shall conclusively establish each of the terms described in the preceding sentence, absent manifest error.  The MBS evidenced by the Loan Confirmation Instrument does not represent a separate indebtedness from that evidenced by this Note.   In making proof of this Note, no other documents other than this Note shall be required.  In making proof of the amount and terms of the outstanding Variable Loans under this Note, this Note, the related Loan Confirmation Instruments, and Lender’s records concerning payments made by Borrower under this Note, shall be conclusive evidence of the terms and outstanding amounts of the Variable Loan, absent manifest error.

24.

Modifications to Note.  There are standard modifications to this Note that are attached as Exhibit B-1 and Exhibit B-2 hereto.  In addition, there may be special modifications to this Note attached as Exhibit B-3 hereto.  All such exhibits are hereby incorporated into this Note as a part hereof.

IN WITNESS WHEREOF, Borrower has signed and delivered this Note under seal or has caused this Note to be signed and delivered under seal by its duly authorized representative.  Borrower intends that this Note shall be deemed to be signed and delivered as a sealed instrument.

[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]

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VMS NATIONAL PROPERTIES, an Illinois joint venture general partnership

By:  VMS National Residential Portfolio I, an Illinois limited partnership, its joint venture partner

By:  Maeril, Inc., a Delaware corporation, its general partner

By: /s/Patti K. Fielding

Patti K. Fielding

Executive Vice President and Treasurer

By:  VMS National Residential Portfolio II, an Illinois limited partnership, its joint venture partner

By:  Maeril, Inc., a Delaware corporation, its general partner

By: /s/Patti K. Fielding

Patti K. Fielding

Executive Vice President and Treasurer

-7-

PAY TO THE ORDER OF FANNIE MAE, WITHOUT RECOURSE.

CAPMARK FINANCE INC., a California corporation

By:/s/Max W. Foore

Max W. Foore

Vice President

-8-

EXHIBIT B-1

GMACCM LOAN AGREEMENT MODIFICATIONS

During any time that the terms, covenants and provisions of that certain Loan Agreement dated as of November 1, 2002 and more particularly described in the second paragraph on page 1 of the Note apply to the Variable Loan evidenced by the Note, paragraphs 3 and 23 of the Note are amended and replaced with the following substitute paragraphs 3 and 23:

“3.

Payment of Principal and Interest.  Principal and interest shall be paid as follows:

(a)

This Note shall evidence a Variable Loan made from time to time under the Loan Agreement.  Borrower shall not be required to make monthly principal payments prior to the Fannie Mae Addition Date, but shall make monthly payments of principal after the Fannie Mae Reassignment Date, if it occurs, as set forth in Section 1.04(d) of the Loan Agreement.

(b)

Borrower shall pay actual interest on the Variable Loan during the period described in accordance with Section 1.04(a) of the Loan Agreement.  Borrower shall pay interest on its Variable Rate Loan in arrears at a rate equal to LIBOR Rate plus a number of basis points determined in accordance with Section 2.01 of the Loan Agreement.  For purposes of the previous sentence, the LIBOR Rate shall be reset every ninety (90) days commencing on the date that is ninety (90) days after the Initial Closing Date.  On the date the Variable Loan is funded, Borrower shall pay interest in advance from the date of funding through January 31, 2007.  On March 1, 2007 and on the first (1st) day of each calendar month thereafter, Borrower shall pay interest in arrears calculated for the actual number of days since the first (1st) day of the previous calendar month.

(c)

If not sooner paid, the entire principal amount of the Variable Loan shall be due and payable in accordance with Section 1.02 of the Loan Agreement.  

(d)

Borrower shall not pay any Discount.

23.

Loan Confirmation Instruments; Accounting for Variable Loans.  The terms of the Loan Agreement and this Note govern the repayment, and all other terms relating to the Variable Loan.  However, Borrower shall execute one or a series of Loan Confirmation Instruments to create a physical instrument evidencing the terms of the Variable Loan.  The Loan Confirmation Instrument or series of Loan Confirmation Instruments executed by Borrower in accordance with Section 2.02 of the Loan Agreement shall set forth the amount, term, the interest rate spread over the LIBOR Rate Closing Date and certain other terms related to the funding the Variable Loan.  The Loan Confirmation Instrument shall conclusively establish each of the terms described in the preceding sentence, absent manifest error.  The variable terms evidenced by the Loan Confirmation Instrument do not represe nt a separate indebtedness from that evidenced by this Note.   In making proof of this Note, no other documents other than this Note shall be required.  In making proof of the amount and terms of the outstanding Variable Loans under this Note, this Note, the related Loan Confirmation Instruments, and Lender’s records concerning payments made by Borrower under this Note, shall be conclusive evidence of the terms and outstanding amounts of the Variable Loan, absent manifest error.”

During any time that the terms, covenants and provisions of that certain Amended and Restated Loan Agreement dated as of September 16, 2002 and more particularly described in the second paragraph on page 1 of the Note apply to the Variable Loan evidenced by the Note, this Exhibit B-1 shall not apply and paragraphs 3 and 23 of the Note shall not be amended or replaced with the provisions set forth in this Exhibit B-1.

B-1

EXHIBIT B-2

AIMCO MODIFICATIONS

The following modifications are made to the text of the Note that precedes this Exhibit:

1.

Section 9(b)(4) is modified by deleting “or” at the end thereof.

2.

Section 9(b)(5) is modified to read as follows:

“(5) failure to apply Rents, first, to the payment of reasonable operating expenses (other than Property management fees that are not currently payable pursuant to the terms of an Assignment of Management Agreement or any other agreement with Lender executed in connection with the Loan) and then to amounts (“Debt Service Amounts”) payable under this Note, the Security Instrument or any other Loan Document (except that Borrower will not be personally liable (i) to the extent that Borrower lacks the legal right to direct the disbursement of such sums because of a bankruptcy, receivership or similar judicial proceeding, or (ii) with respect to Rents that are distributed in any calendar quarter if Borrower has paid all operating expenses and Debt Service Amounts for such calendar quarter to date); or”

3.

A new Section 9(b)(6) is added following Section 9(b)(5), stating as follows:

“(6) failure to pay when due any water and sewer charges, fire, hazard or other insurance premiums and ground rents owing from time to time in connection with the Mortgaged Property.”

B-2

EX-10

EXHIBIT 10.63

Terrace Garden Apartments

GUARANTY

This Guaranty (the “Guaranty”) is made and entered into as of the 18^th day of January, 2007 by AIMCO PROPERTIES, L.P., a Delaware limited partnership (the “Guarantor”), for the benefit of CAPMARK FINANCE INC., a California corporation (“Lender”).

RECITALS

A.

Lender has agreed to execute both (i) that certain Amended and Restated Loan Agreement, dated as of September 16, 2002, by and among AIMCO Properties, L.P., a Delaware limited partnership, certain borrowers signatory thereto and Lender and (ii) that certain Loan Agreement dated as of November 1, 2002, by and among certain borrowers signatory thereto and Lender (as amended, supplemental or otherwise modified or amended and restated from time to time, the “Loan Agreement”),  pursuant to which, inter alia, Lender has agreed, subject to the terms, conditions and limitations of the Loan Agreement, to make a loan to VMS National Properties, an Illinois joint venture general partnership (the “Borrower”) from time to time loan to be evidenced by the Note (the “Loan”).  Terms used herein not defined herein have the definition given them in the Loan Agreement.

B.

The repayment of the Loan and all of the Obligations of the Borrower under the Loan Agreement or the other Loan Documents are guaranteed by this Guaranty to the extent of Borrower’s personal liability as provided in Section 9 of the Note evidencing the Loan, and except for such obligations described herein, Guarantor shall have no liability in connection with, or responsibility to perform, under or in accordance with the Loan Agreement or other Loan Documents.

C.

Guarantor owns, directly or indirectly, an ownership interest in the Borrower and will receive a direct and material benefit from the Loans to the Borrower.

D.

Lender is willing to make the Loan to the Borrower only if Guarantor agrees to enter into this Guaranty.

NOW, THEREFORE, in order to induce Lender to make the Loan to Borrower, and in consideration thereof, Guarantor hereby agrees as follows:

Section 1.

Definitions.  All capitalized terms used but not defined in this Guaranty shall have the meanings ascribed to such terms in the Loan Agreement.  The following terms shall have the meaning set forth below for purposes of this Guaranty:

“Material Adverse Effect” means, with respect to any circumstance, act, condition or event of whatever nature (including any adverse determination in any litigation, arbitration, or governmental investigation or proceeding), whether singly or in conjunction with any other event or events, act or acts, condition or conditions, or circumstance or circumstances, whether or not related, a material adverse change in or a materially adverse effect upon the present or future ability of the Guarantor, to the extent specifically referred to in the applicable provision of that Guaranty, to perform the Guaranteed Obligations.

“Net Worth” means, as of any date of determination and without double counting any item, the sum of the capital stock or other capital equity interests and additional paid-in capital

1

plus retained earnings (or minus accumulated deficits) of the Guarantor, the REIT and their respective Subsidiaries on a consolidated basis determined in conformity with GAAP.

“REIT” means Apartment Investment and Management Company, a Maryland corporation.

“Subsidiary” means, with respect to the REIT, the Guarantor or an Affiliate of either of them, a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise controlled, directly or indirectly, through one or more intermediaries, or both, by the REIT, the Guarantor or an Affiliate of either of them.

Section 2.

Guaranty of Payment.  Guarantor irrevocably, absolutely and unconditionally guarantees to Lender all of the following (collectively, the “Guaranteed Obligations”):  the due and punctual payment when due, whether at maturity or earlier, by reason of acceleration or otherwise, at all times, of all amounts for which Borrower is personally liable under Section 9 of the Note.

This Guaranty shall be an unconditional guaranty of payment and performance and not of collection, and is in no way conditioned upon any attempt by Lender to pursue or exhaust any remedy against Borrower.  This Guaranty is a continuing guaranty which shall remain in full force and effect until all of the Guaranteed Obligations have been paid and performed in full; and Guarantor shall not be released from any obligations to Lender under this Guaranty as long as any amount payable by the Borrower to Lender, or any obligation by the Borrower, under the Loan Documents is not performed, satisfied, settled or paid in full.

Section 3.

Form of Payment.  All payments under this Guaranty shall be made to Lender in immediately available funds, without reduction by any recoupment, set-off, counterclaim or cross-claim against Lender.

Section 4.

Guarantor’s Obligations are Absolute.  The obligations of Guarantor under this Guaranty shall be absolute and unconditional, shall not be subject to any counterclaim, set-off, recoupment, deduction, or defense based upon any claim Guarantor may have against Lender or Borrower and shall remain in full force and effect without regard to, and shall not be released, discharged or terminated or in any other way affected by, any circumstance or condition (whether or not Guarantor shall have any knowledge or notice thereof), including, without limitation:

(a)

any amendment or modification of, or extension of time for payment of any of the principal of, interest on or other amounts payable under the Loan Documents;

(b)

any exercise or non-exercise by Lender of any right, power or remedy under or in respect of the Loan Documents, or any waiver, consent, forbearance, indulgence or other action, inaction or omission by Lender under or in respect of the Loan Documents;

(c)

any assignment, sale or other transfer of Borrower’s interest in all or any part of the real or personal property which at any time constitutes collateral for the payment of the Guaranteed Obligations, including, without limitation, a conveyance of such property by Borrower to Lender by deed in lieu of foreclosure;

(d)

any bankruptcy, insolvency, reorganization, adjustment, dissolution, liquidation or other like proceeding involving or affecting Borrower or Lender or their respective properties or

2

creditors, or any action taken with respect to the Loan Documents by any trustee or receiver of Borrower or Lender, or by any court, in any such proceeding;

(e)

any invalidity or unenforceability, in whole or in part, of any term or provision of the Loan Documents or Borrower’s incapacity or lack of authority to enter into the Loan Documents;

(f)

any release, compromise, settlement or discharge with respect to all or any portion of Borrower’s obligations under the Loan Documents;

(g)

any acceptance of additional or substituted collateral for payment of the Guaranteed Obligations or any release or subordination of any collateral held at any time by Lender as security for the payment of the Guaranteed Obligations; or

(h)

any resort to Guarantor for payment of all or any portion of the Guaranteed Obligations, whether or not Lender shall have resorted to any collateral securing the Guaranteed Obligations, if any, or shall have proceeded to pursue or exhaust its remedies against Borrower (or any other Person) primarily or secondarily liable for the Guaranteed Obligations.

No exercise, delay in exercise or non-exercise by Lender of any right hereby given it, no dealing by Lender with Borrower, Guarantor or any other Person, no change, impairment or suspension of any right or remedy of Lender, and no act or thing which, but for this provision, could act as a release or exoneration of the liabilities of Guarantor hereunder, shall in any way affect, decrease, diminish or impair any of the obligations of Guarantor hereunder or give Guarantor or any other Person any recourse or defense against Lender.

Section 5.

Waiver.  Guarantor unconditionally waives the following:

(a)

notice of acceptance of this Guaranty and notice of any of the matters referred to in Section 4 hereof;

(b)

all notices which may be required by statute, rule of law or otherwise to preserve intact any rights which Lender may have against Guarantor under this Guaranty, including, without limitation, any demand, proof or notice of non-payment of any of the principal of, interest on or other amounts payable under the Loan Documents, and notice of any failure on the part of Borrower to perform and comply with any covenant, agreement, term or condition of the Loan Documents;

(c)

any right to the enforcement, assertion or exercise of any right, power or remedy conferred upon Lender in the Loan Documents or otherwise;

(d)

any requirement that Lender act with diligence in enforcing its rights under the Loan Documents or this Guaranty;

(e)

any right to require Lender to proceed against or exhaust its recourse against Borrower or any security or collateral held by Lender, if any, at any time for the payment of the Guaranteed Obligations or to pursue any other remedy in its power before being entitled to payment from Guarantor under this Guaranty or before proceeding against Guarantor;

(f)

any failure by Lender to file or enforce a claim against the estate (either in administration, bankruptcy or any other proceeding) of Borrower or any other Person;

3

(g)

any defense based upon an election of remedies by Lender which destroys or otherwise impairs the subrogation rights of Guarantor or the right of Guarantor (after payment of the Guaranteed Obligations) to proceed against Borrower for reimbursement, or both;

(h)

any defense based upon any taking, modification or release of any collateral for the Guaranteed Obligations, if any, or any failure to perfect any security interest in, or the taking of, or failure to take any other action with respect to, any collateral securing payment of the Guaranteed Obligations, if any;

(i)

any defense based upon the addition, substitution or release, in whole or in part, of any Person(s), including, without limitation, another guarantor, primarily or secondarily liable for or in respect of the Guaranteed Obligations;

(j)

any rights or defenses based upon an offset by Guarantor against any obligation now or hereafter owed to Guarantor by Borrower; and

(k)

all other notices which may or might be lawfully waived by Guarantor;

it being the intention hereof that Guarantor shall remain liable as principal, to the extent set forth in this Guaranty, until the payment and performance in full of the Guaranteed Obligations, notwithstanding any act, omission or thing which might otherwise operate as a legal or equitable discharge of Guarantor other than the payment and performance in full of the Guaranteed Obligations.  No delay by Lender in exercising any rights and/or powers hereunder or in taking any action to enforce Borrower’s obligations under the Loan Documents shall operate as a waiver as to such rights or powers or in any manner prejudice any and all of Lender’s rights and powers hereunder against Guarantor.  The intention of Guarantor under this Guaranty is that, so long as any of the Guaranteed Obligations remains unsatisfied, the obligations of Guarantor hereunder shall not be discharged except by performance and then only to the extent of such performance.  Guarantor agrees that Guarantor’s obligations hereunder shall not be affected by any circumstances, whether or not referred to in this Guaranty, which might constitute a legal or equitable discharge of a surety or guarantor.

Section 6.

Election of Remedies.  This Guaranty may be enforced from time to time, as often as occasion therefor may arise, and without any requirement that Lender must first pursue or exhaust any remedies available to it against Borrower under the Loan Documents or against any other Person or resort to any collateral at any time held by it for performance of the Guaranteed Obligations, if any, or any other source or means of obtaining payment of any of the Guaranteed Obligations.

Section 7.

Representations and Warranties of Guarantor.  Guarantor hereby represents and warrants to the Lender as follows:

(a)

Due Organization; Qualification.  Guarantor is qualified to transact business and is in good standing in the State in which it is organized and in each other jurisdiction in which such qualification and/or standing is necessary to the conduct of its business and where the failure to be so qualified would adversely affect the validity of, the enforceability of, or the ability of Guarantor to perform the Guaranteed Obligations.

(b)

Power and Authority.  Guarantor has the requisite power and authority (i) to own its properties and to carry on its business as now conducted and as contemplated to be conducted in connection with the performance of the Guaranteed Obligations, and (ii) to execute and deliver this Guaranty and to carry out the transactions contemplated by this Guaranty.

(c)

Due Authorization.  The execution, delivery and performance of this Guaranty has been duly authorized by all necessary action and proceedings by or on behalf of Guarantor,

4

and no further approvals or filings of any kind, including any approval of or filing with any Governmental Authority, are required by or on behalf of Guarantor as a condition to the valid execution, delivery and performance by Guarantor of this Guaranty.

(d)

Valid and Binding Obligations.  This Guaranty has been duly authorized, executed and delivered by Guarantor and constitutes the legal, valid and binding obligations of Guarantor, enforceable against Guarantor in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles affecting the enforcement of creditors’ rights generally or by equitable principles or by the exercise of discretion by any court.

(e)

Non-contravention: No Liens.  Neither the execution and delivery of this Guaranty, nor the fulfillment of or compliance with the terms and conditions of this Guaranty nor the payment or performance of the Guaranteed Obligations:

(i)

does or will conflict with or result in any breach or violation of any Applicable Law enacted or issued by any Governmental Authority or other agency having jurisdiction over Guarantor, any of the Mortgaged Properties or any other portion of the Collateral or assets of Guarantor, or any judgment or order applicable to Guarantor or to which Guarantor is subject;

(ii)

does or will conflict with or result in any material breach or violation of, or constitute a default under, any of the terms, conditions or provisions of Guarantor’s Organizational Documents, any indenture, existing agreement or other instrument to which Guarantor is a party or to which Guarantor, any of the Mortgaged Properties or any other portion of the Collateral or other assets of Guarantor is subject; or

(iii)

does or will require the consent or approval of any creditor of Guarantor, any Governmental Authority or any other Person except such consents or approvals which have already been obtained.

(f)

Pending Litigation or Other Proceedings.  Since the date of the most recent financial statements delivered to Lender pursuant to Section 8(b) of this Guaranty, there is no pending or, to the best knowledge of guarantor, threatened action, suit, proceeding or investigation, at law or in equity, before any court, board, body or official of any Governmental Authority or arbitrator which, if decided adversely to Guarantor, would have, or may reasonably be expected to have, a Material Adverse Effect on Guarantor. Guarantor is not in default with respect to any order of any Governmental Authority to any extent which would have, or may reasonably be expected to have, a Material Adverse Effect on Guarantor.

(g)

Solvency.  Guarantor is not insolvent and will not be rendered insolvent by the transaction contemplated by this Guaranty and after giving effect to such transaction, Guarantor will not be left with an unreasonably small amount of capital with which to engage in its business or undertakings, nor will Guarantor have incurred, have intended to incur, or believe that it has incurred, debts beyond its ability to pay such debts as they mature. Guarantor did not receive less than a reasonably equivalent value in exchange for incurrence of the Guaranteed Obligations.  There (i) is no contemplated, pending or, to the best of Guarantor’s knowledge, threatened bankruptcy, reorganization, receivership, insolvency or like proceeding, whether voluntary or involuntary, affecting Guarantor and (ii) has been no assertion or exercise of jurisdiction over Guarantor by any court empowered to exercise bankruptcy powers.

(h)

No Contractual Defaults.  There are no material defaults by Guarantor or, to the knowledge of Guarantor, by any other Person under any contract to which Guarantor is a party other than defaults which do not have, and are not reasonably be expected to have, a Material Adverse Effect on Guarantor.  Neither Guarantor nor, to the knowledge of Guarantor, any other

5

Person, has received notice or has any knowledge of any existing circumstances in respect of which it could receive any notice of default or breach in respect of any contracts, which default would have, or which may reasonably be expected to have, a Material Adverse Effect on Guarantor.

(i)

Representations True and Correct.  The representations and warranties made by Guarantor in this Guaranty are true, complete and correct in all material respects as of the Initial Closing Date and do not contain any untrue statement of material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.

(j)

ERISA.  Guarantor is in compliance in all material respects with all applicable provisions of ERISA and has not incurred any liability to the PBGC on a Plan under Title LV of ERISA.  None of the assets of Guarantor constitute plan assets (within the meaning of Department of Labor Regulation § 2510.3-101) of any employee benefit plan subject to Title I of ERISA.

(k)

Financial Information.  The financial statements of Guarantor which have been furnished to the Lender are complete and accurate in all material respects and present fairly the financial condition of Guarantor, as of its date in accordance with GAAP, applied on a consistent basis.  Since the date of the most recent of such financial statements no event has occurred which would have, or may reasonably be expected to have a Material Adverse Effect on Guarantor, except as disclosed in any filings made by Guarantor or its affiliates with the United States Securities and Exchange Commission (“SEC”).  Guarantor has no material contingent obligations which are not otherwise disclosed in its most recent financial statements except as disclosed in any filings made by Guarantor or its affiliates with the SEC.

(l)

Accuracy of Information.  No information, statement or report furnished in writing to the Lender by Guarantor concerning the Guarantor in connection with this Guaranty or any other Loan Document or in connection with the consummation of the transactions contemplated hereby and thereby contains any material misstatement of fact or omits to state a material fact necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading as of the date made, except to the extent that such misstatements and omissions when considered in the totality of such information, statements and reports furnished by Guarantor are not materially misleading in the aggregate; provided, however, the foregoing representation and warranty shall not apply to any information, statement or report prepared by any third party.

(m)

No Conflicts of Interest.  To the best knowledge of Guarantor, no member, officer, agent or employee of the Lender has been or is in any manner interested, directly or indirectly, in that Person’s own name, or in the name of any other Person, in the Guarantor (other than through the ownership of publicly traded shares of common stock of affiliates of the Guarantor or limited partnership units of Guarantor), the Loan Documents, or any Mortgaged Property, in any contract for property or materials to be furnished or used in connection with such Mortgaged Property or in any aspect of the transactions contemplated by the Loan Documents.

(n)

Governmental Approvals.  To the best of Guarantor’s knowledge, no Governmental Approval not already obtained or made is required for the execution and delivery of this Guaranty or the performance of the terms and provisions hereof by Guarantor.

(o)

Governmental Orders.  Guarantor is not presently under any cease or desist order or other orders of a similar nature, temporary or permanent, of any Governmental Authority which would have the effect of preventing or hindering performance of its duties hereunder, nor

6

are there any proceedings presently in progress or to its knowledge contemplated which would, if successful, lead to the issuance of any such order.

(p)

No Reliance.  Guarantor acknowledges, represents and warrants that it understands the nature and structure of the transactions contemplated by this Guaranty and the other Loan Documents; that it is familiar with the provisions of all of the documents and instruments relating to such transactions; that it understands the risks inherent in such transactions, including the risk of loss of all or any of the Mortgaged Properties; and that it has not relied on the Lender or Fannie Mae for any guidance or expertise in analyzing the financial or other consequences of the transactions contemplated by this Guaranty or any other Loan Document or otherwise relied on the Lender or Fannie Mae in any manner in connection with interpreting, entering into or otherwise in connection with this Guaranty, any other Loan Document or any of the matters contemplated hereby or thereby.

(q)

Compliance with Applicable Law.  Guarantor is in compliance with Applicable Law, including all Governmental Approvals, if any, except for such items of noncompliance that, singly or in the aggregate, have not had and are not reasonably expected to cause, a Material Adverse Effect on Guarantor.

(r)

Contracts with Affiliates.  Except for the management agreement relating to each of the Mortgaged Properties or in the ordinary course of business and on terms which are no less favorable to the Guarantor than would be obtained in a corporate arms-length transaction with an unrelated third party, Guarantor has not entered into and is not a party to any material contract, lease or other agreement with any Affiliate of Guarantor for the provision of any service, materials or supplies relating to any Mortgaged Property.

Section 8.

Affirmative Covenants of Guarantor.  Guarantor agrees and covenants with the Lender that, at all times during the Term of this Guaranty:

(a)

Maintenance of Existence.  Guarantor shall maintain its existence and continue to be a limited partnership organized under the laws of the state of its organization. Guarantor shall continue to be duly qualified to do business in each jurisdiction in which such qualification is necessary to the conduct of its business and where the failure to be so qualified would adversely affect the validity of, the enforceability of, or the ability to perform, its obligations under this Guaranty.

(b)

Financial Statements; Accountants’ Reports: Other Information.  The Guarantor shall keep and maintain at all times complete and accurate books of accounts and records in sufficient detail to correctly reflect all of the Guarantor’s financial transactions and assets. In addition, the Guarantor shall furnish, or cause to be furnished, to the Lender the following:

(i)

So long as Guarantor is a reporting company under the Securities and Exchange Act of 1934 (the “’34 Act”), promptly upon their becoming available, copies of (A) all 10K’s, 10Q’s, 8K’s, annual reports and proxy statements, and all replacement, substitute or similar filings or reports required to be filed after the date of this Guaranty by the SEC or other Governmental Authority exercising similar functions, and (B) all press releases and other statements made available generally by Guarantor to the public concerning material developments in the business of Guarantor.

(ii)

In the event Guarantor is not a reporting company under the ’34 Act,

(A)

Annual Financial Statements.  As soon as available, and in any event within 90 days after the close of its fiscal year during the Term of this Agreement, the audited balance sheet of Guarantor as of the end of such fiscal year, the audited statement of income, equity and retained earnings of Guarantor

7

for such fiscal year and the audited statement of cash flows of Guarantor for such fiscal year, all in reasonable detail and stating in comparative form the respective figures for the corresponding date and period in the prior fiscal year, prepared in accordance with GAAP, consistently applied, and accompanied by a certificate of Guarantor’s independent certified public accountants to the effect that such financial statements have been prepared in accordance with GAAP, consistently applied, and that such financial statements fairly present the results of its operations and financial condition for the periods and dates indicated with such certification to be free of exceptions and qualifications as to the scope of the audit or as to the going concern nature of the business.

(B)

Quarterly Financial Statements.  As soon as available, and in any event within 45 days after each of the first three fiscal quarters of each fiscal year during the Term of this Agreement, the unaudited balance sheet of Guarantor as of the end of such fiscal quarter, the unaudited statement of income and retained earnings of Guarantor and the unaudited statement of cash flows of Guarantor for the portion of the fiscal year ended with the last day of such quarter, all in reasonable detail and stating in comparative form the respective figures for the corresponding date and period in the previous fiscal year, accompanied by a certificate of a member of Senior Management (which certificate shall be without personal liability to such officer) stating that such financial statements have been prepared in accordance with GAAP, consistently applied, and fairly present th e results of its operations and financial condition for the periods and dates indicated subject to year end adjustments in accordance with GAAP.

(iii)

[Left blank intentionally]

(iv)

Other Reports.  Promptly upon receipt thereof, all schedules, financial statements or other similar reports delivered by the Guarantor pursuant to the Loan Documents or reasonably requested by the Lender with respect to the Guarantor’s business affairs or condition (financial or otherwise) subject to the confidentiality covenant set forth below.  

After the providing by Guarantor of any statement, report or other information on a collective basis to Standard & Poor’s, Moody’s Investors Service, Duff & Phelps, Fitch and/or any other rating agency, and/or after providing any statement, report or other information on a collective basis to the banks or other institutions providing unsecured lines of credit and loans to Guarantor, Guarantor shall promptly furnish such statement, report or other information to Lender.

As used in this Paragraph (iv), the phrase “on a collective basis” means as provided to a group as a whole as opposed to an individual basis, e.g.., providing information to a rating agency or to a bank to respond to a particular request of such rating agency or bank.

The Lender agrees to treat all Information received by it (I) under this Paragraph (iv) as confidential and (II) which Guarantor requests in writing to the Persons at the Lender who receive any Information regarding Guarantor that such information be treated as confidential; provided, however, that such Information may be disclosed (A) as required by law, (B) to officers, directors, employees, agents, partners, attorneys, auditors, accountants, engineers and other consultants of the Lender, or its successors or assigns, who need to know such Information, provided such Persons are instructed to treat such Information confidentially, (C) by the Lender to any successor or assign of such Person, (D) to any federal or state regulatory authority having jurisdiction over the Lender, or its successors or assigns, (E) to any other Person to which such delivery or

8

disclosure may be necessary or appropriate (w) in compliance with any law, rule, regulation or order applicable to the Lender, or its successors or assigns, (x) in response to any subpoena or other legal process or information investigative demand, or (y) in connection with any litigation to which the Lender, or its successors or assigns, is a party.  Guarantor agrees that Information subject to this Paragraph (iv) does not include information which (I) was publicly known, or otherwise known to the Lender, or its successors or assigns, at the time of disclosure, (II) subsequently becomes publicly known through no act of or omission by the Lender or its successors or assigns, other than through disclosure by Guarantor or by any other Person in violation of this Paragraph (iv) or  any other confidentiality arrangement and the Lender, or its successors or assigns, has knowledge of suc h violation; provided, however, that in the event the disclosing Person shall reasonably endeavor to notify Guarantor thereof as soon as possible after such disclosure has been made and Guarantor shall be afford an opportunity to seek protective orders, or such other confidential treatment of such Information as Guarantor may deem reasonable.  

(v)

Certification.  All certifications required to be delivered pursuant to this Section 8(b) shall run directly to and be for the benefit of Lender and Fannie Mae.

(c)

Maintain Licenses.  Guarantor shall procure and maintain in full force and effect all licenses, Permits, charters and registrations which are material to the conduct of its business and shall abide by and satisfy all terms and conditions of all such licenses, Permits, charters and registrations.

(d)

Access to Records; Discussions With Senior Management.  To the extent permitted by law, Guarantor shall permit the Lender to:

(i)

inspect Guarantor’s books and records related to the Borrower and the Mortgaged Property;

(ii)

discuss Guarantor’s affairs, finances and accounts with Guarantor’s Senior Management or, provided that Senior Management of Guarantor has been given the opportunity by Lender to be a party to such discussions, property managers and independent public accountants;

(iii)

provided that Senior Management of Guarantor has been given the opportunity by Lender to be a party to such discussions, discuss the Mortgaged Properties’ conditions, operations or maintenance with the managers of such Mortgaged Properties and the officers and employees of Guarantor; and

(iv)

receive any other information that the Lender deems reasonably necessary or relevant in connection with the Guaranty, any Loan Document or the Guaranteed Obligations.

Notwithstanding the foregoing, prior to an Event of Default or Potential Event of Default, all inspections shall be conducted at reasonable times during normal business hours and upon reasonable notice to the Guarantor.

(e)

Inform the Lender of Material Events.  Guarantor shall promptly, but in any event within five (5) Business Days, inform the Lender in writing of any of the following (and shall deliver to the Lender copies of any related written communications, complaints, orders, judgments and other documents relating to the following) of which Guarantor has actual knowledge:

9

(i)

Defaults.  The occurrence of any Event of Default or any Potential Event of Default under any Loan Document;

(ii)

Bankruptcy Proceedings.  The commencement of any proceedings by or against Guarantor under any applicable bankruptcy, reorganization, liquidation, insolvency or other similar law now or hereafter in effect or of any proceeding in which a receiver, liquidator, trustee or other similar official is sought to be appointed for it;

(iii)

Accounting Changes.  Any material change in Guarantor’s accounting policies or financial reporting practices; and

(iv)

Restructuring of Guarantor.  Any restructuring or reorganization of any Guarantor.

(f)

ERISA.  Guarantor shall at all times remain in compliance in all material respects with all applicable provisions of ERISA and similar requirements of the PBGC.

(g)

Further Assurances.  Provided they do not materially increase the Guaranteed Obligations of Guarantor, Guarantor, at the request of the Lender, but without incurring any liability beyond the Guaranteed Obligations, shall execute and deliver and, if necessary, file or record such statements, documents, agreements, UCC financing and continuation statements and such other instruments and take such further action as the Lender from time to time may request as reasonably necessary, desirable or proper to carry out more effectively the purposes of this Guaranty or any of the other Loan Documents or to subject the Collateral to the lien and security interests of the Loan Documents or to evidence, perfect or otherwise implement, to assure the lien and security interests intended by the terms of the Loan Documents or in order to exercise or enforce its rights under the Loan Documents.

(h)

Monitoring Compliance.  Upon the request of the Lender, but without incurring any liability beyond the Guaranteed Obligations, from time to time, Guarantor shall promptly provide to the Lender such documents, certificates and other information as may be deemed reasonably necessary to enable the Lender to perform its functions under the Servicing Agreement as the same relates to the Guarantor.

Section 9.

Negative Covenants of Guarantor.

(a) Liquidation. Guarantor shall not dissolve or liquidate in whole or in part.

(b) Principal Place of Business. Guarantor shall not change its principal place of business or the location of its books and records without first giving 10 days' prior written notice to the Lender.

Section 10. Financial Covenants. Guarantor agrees and covenants with the Lender that, at all times during the Term of this Guaranty, the Net Worth of the REIT, the Guarantor and the Subsidiaries on a consolidated basis shall not be below $1,500,000,000.

Section 11.

Expenses.  Guarantor agrees to pay all reasonable costs and out-of-pocket expenses, including court costs and expenses and the reasonable fees and disbursements of legal counsel, incurred by or on behalf of Lender in connection with the enforcement of Guarantor’s obligations under this Guaranty or the protection of Lender’s rights under this Guaranty. The covenants contained in this Section shall survive the payment of the Guaranteed Obligations.

Section 12.

Condition of Borrower.  Guarantor is fully aware of the financial condition of Borrower and is executing and delivering this Guaranty based solely upon

10

Guarantor’s own independent investigation of all matters pertinent hereto and is not relying in any manner upon any representation or statement made by Lender. Guarantor represents and warrants that Guarantor is in a position to obtain, and Guarantor hereby assumes full responsibility for obtaining, any additional information concerning Borrower’s financial condition and any other matters pertinent hereto as Guarantor may desire and Guarantor is not relying upon or expecting Lender to furnish to Guarantor any information now or hereafter in Lender’s possession concerning the same or any other matter. By executing this Guaranty, Guarantor knowingly accepts the full range of risks encompassed within a contract of this type, which risks Guarantor acknowledges.

Section 13.

Further Assurances.  Guarantor agrees at any time and from time to time upon request by Lender to take, or cause to be taken, any action and to execute and deliver any additional documents which, in the reasonable opinion of Lender, may be necessary in order to assure to Lender the full benefits of this Guaranty, so long as any such action does not materially increase Guarantor’s Guaranteed Obligations hereunder or materially decrease its rights hereunder.

Section 14.

Subordination.  Guarantor hereby irrevocably and unconditionally agrees that any claims, direct or indirect, Guarantor may have by subrogation or other form of reimbursement, against Borrower or to any security or any interest therein, by virtue of this Guaranty or as a consequence of any payment made by Guarantor pursuant to this Guaranty, shall be fully subordinated in time and right of payment to the payment in full of the Guaranteed Obligations and all other obligations of Guarantor to Lender under this Guaranty.

Section 15.

No Subrogation.  Guarantor shall not have any right of subrogation against Borrower by reason of any payment by Guarantor under this Guaranty until such time as all of the Guaranteed Obligations have been satisfied in full. Nothing in the foregoing shall affect any claim which any Guarantor has against Borrower under the terms of the Organizational Documents of the Borrower.

Section 16.

Insolvency and Liability of Borrower.  So long as any of the Guaranteed Obligations is unpaid and this Guaranty is in effect, and to the extent not prohibited by the applicable bankruptcy court, Guarantor agrees to file all claims against Borrower in any bankruptcy or other proceeding in which the filing of claims is required by law in connection with indebtedness owed by Borrower to Guarantor and to assign to Lender all rights of Guarantor thereunder up to the lesser of (i) the amount of such indebtedness or (ii) the amount of the Guaranteed Obligations.  In all such cases the Person or Persons authorized to pay such claims shall pay to Lender the full amount thereof to the full extent necessary to pay the Guaranteed Obligations, and Guarantor hereby assigns to Lender all of Guarantor’s rights to all such payments to which Guarantor would otherwise be entitled. Notw ithstanding the foregoing, and except to the extent that any sums owed by Borrower to Lender under the Loan Documents shall have been fully satisfied thereby, the liability of Guarantor hereunder shall in no way be affected by

(a)

the release or discharge of Borrower in any creditors’, receivership, bankruptcy or other proceedings; or

(b)

the impairment, limitation or modification of the liability of Borrower or the estate of Borrower in bankruptcy resulting from the operation of any present or future provisions of the Bankruptcy Code or other statute or from the decision in any court.

Section 17.

Preferences, Fraudulent Conveyances, Etc.  If Lender is required to refund, or voluntarily refunds, any payment received from Borrower because such payment is or may be avoided, invalidated, declared fraudulent, set aside or determined to be void or voidable as a preference, fraudulent conveyance, impermissible setoff or a diversion of trust funds under

11

the bankruptcy laws or for any similar reason, including, without limitation, any judgment, order or decree of any court or administrative body having jurisdiction over Lender or any of its property, or any settlement or compromise of any claim effected by Lender with Borrower or other claimant (a “Rescinded Payment”), then Guarantor’s liability to Lender shall continue in full force and effect, or Guarantor’s liability to Lender shall be reinstated, as the case may be, with the same effect and to the same extent as if the Rescinded Payment had not been received by Lender (but only to the extent such Rescinded Payment was part of the Guaranteed Obligations hereunder), notwithstanding the cancellation or termination of any Note or any of the other Loan Documents. In addition, Guarantor shall pay, or reimburse Lender for, all expenses (including all reasona ble attorneys’ fees, court costs and related disbursements) incurred by Lender in the defense of any claim that a payment received by Lender in respect of all or any part of the Guaranteed Obligations from Guarantor must be refunded. The provisions of this Section shall survive the termination of this Guaranty and any satisfaction and discharge of Borrower by virtue of any payment, court order or any federal or state law.

Section 18.

Waiver.  Neither this Guaranty nor any term hereof may be changed, waived, discharged or terminated except by an instrument in writing signed by Lender and Guarantor expressly referring to this Guaranty and to the provisions so changed or limited. No such waiver shall extend to or affect any obligation not expressly waived or impair any right consequent thereon. No course of dealing or delay or omission on the part of Lender in exercising any right under this Guaranty shall operate as a waiver thereof or otherwise by prejudice thereto.

Section 19.

Notices.  All notices or other communications hereunder shall be sufficiently given and shall be deemed given when sent in the manner prescribed by the Loan Agreement addressed to the parties as follows:

As to the Guarantor:

AIMCO

Stanford Place 3

4582 South Ulster St. Parkway

Suite 1100

Denver, Colorado  80237

Attn:  Senior Vice President-Debt & Securities

with a copy to:

Ballard Spahr Andrews & Ingersoll, LLP

Seventeenth Street Plaza Building

1225 17^th Street, Suite 2300

Denver, Colorado 80202

Attn:  Gwendolyn C. Allen, Esquire

If to Lender or Fannie Mae:

As provided in the Loan Agreement.

Section 20.

Assignability by Lender.  Lender may, without notice to Guarantor, assign or transfer the Loans and the Loan Documents, in whole or in part. In such event, each and every immediate and successive assignee, transferee or holder of all or any part of the Loans and the Loan Documents shall have the right to enforce this Guaranty, by legal action or otherwise, as fully as if such assignee, transferee, or holder were by name specifically given such right and power in this Guaranty. Lender shall have an unimpaired right to enforce this Guaranty for its benefit as to so much of the Loans and the Loan Documents as Lender has not sold, assigned or transferred.

12

Section 21.

Guarantor Bound by Judgment Against Borrower.  Guarantor shall be conclusively bound, in any jurisdiction, by the judgment in any action by Lender against Borrower in connection with the Loan Documents (wherever instituted) as if Guarantor were a party to such action even if not so joined as a party.

Section 22.

Governing Law.  The provisions of Section 11.06 of the Loan Agreement (entitled Choice of Law; Consent to Jurisdiction; Waiver of Jury Trial) are hereby incorporated into this Agreement by this reference to the fullest extent as if the text of such Section were set forth in its entirety herein.

Section 23.

Invalid Provisions.  If any provision of this Guaranty or the application thereof to Guarantor or any circumstance in any jurisdiction whose laws govern this Guaranty shall, to any extent, be invalid or unenforceable under any applicable statute, regulation or rule of law, then such provision shall be deemed inoperative to the extent of such invalidity or unenforceability and shall be deemed modified to conform to such statute, regulation or rule or law. The remainder of this Guaranty and the application of any such invalid or unenforceable provision to parties, jurisdictions or circumstances other than those to whom or to which it is held invalid or unenforceable, shall not be affected by such invalidity or unenforceability nor shall such invalidity or unenforceability affect the validity or enforceability of any other provision of this Guaranty.

Section 24.

General Provisions.  This Guaranty shall be binding upon the respective successors and assigns of Guarantor, and shall inure to the benefit of Lender and its successors and assigns, including, without limitation, each successive holder of the Note. The descriptive headings of the Sections of the Guaranty have been inserted herein for convenience of reference only and shall not define or limit the provisions hereof.

ATTACHED EXHIBITS.  The following Exhibits are attached to this Instrument:

X Exhibit A Modifications to Guaranty

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]

13

IN WITNESS WHEREOF, Guarantor has signed this Guaranty under seal as of the day and year first above written.

AIMCO PROPERTIES, L.P., a Delaware limited partnership

By:  AIMCO-GP, Inc., a Delaware corporation, its general partner

By: /s/Patti K. Fielding

Patti K. Fielding

Executive Vice President and Treasurer

14

EXHIBIT A

MODIFICATIONS TO GUARANTY

The following modifications are hereby made to the text of the Guaranty that precedes this Exhibit:

1.

A new Section 25 is hereby added as follows:

“Section 25.

Additional Guaranty Relating to Bankruptcy.  

(a)

Notwithstanding any limitation on liability provided for elsewhere in this Guaranty, Guarantor hereby absolutely, unconditionally and irrevocably guarantees to Lender the full and prompt payment when due, whether at the maturity date or earlier, by reason of acceleration or otherwise, and at all times thereafter, the entire Indebtedness, in the event that:

(i)

Borrower voluntarily files for bankruptcy protection under the United States Bankruptcy Code; or

(ii)

Borrower voluntarily becomes subject to any reorganization, receivership, insolvency proceeding, or other similar proceeding pursuant to any other federal or state law affecting debtor and creditor rights; or

(iii)

an order of relief is entered against Borrower pursuant to the United States Bankruptcy Code or other federal or state law affecting debtor and creditor rights in any involuntary bankruptcy proceeding initiated or joined in by a "Related Party."  

(b)

For purposes of this Section, the term "Related Party" means:

(i)

Borrower or Guarantor; and

(ii)

any person or entity that holds, directly or indirectly, any ownership interest in or right to manage Borrower or Guarantor, including without limitation, any shareholder, member or partner of Borrower or Guarantor; and

(iii)

any person or entity in which any ownership interest (direct or indirect) or right to manage is held by Borrower, Guarantor or any partner, shareholder or member of, or any other person or entity holding an interest in, Borrower or Guarantor; and

(iv)

any other creditor of Borrower that is related by blood, marriage or adoption to Borrower, Guarantor or any partner, shareholder or member of, or any

PAGE A-1

other person or entity holding an interest in, Borrower or Guarantor.  

If Borrower, Guarantor or any Related Party has solicited creditors to initiate or participate in any proceeding referred to in this Section, regardless of whether any of the creditors solicited actually initiates or participates in the proceeding, then such proceeding shall be considered as having been initiated by a Related Party.”

_____________

INITIALS

PAGE A-2

EX-10

EXHIBIT 10.55

Prepared by, and after recording

return to:

Brian J. Iwashyna, Esquire

Troutman Sanders LLP

P.O. Box 1122

Richmond, Virginia  23218-1122

MULTIFAMILY DEED OF TRUST,

ASSIGNMENT OF RENTS

AND SECURITY AGREEMENT AND FIXTURE FILING

(TEXAS)

NOTICE OF CONFIDENTIALITY RIGHTS:  IF YOU ARE A NATURAL PERSON, YOU MAY REMOVE OR STRIKE ANY OF THE FOLLOWING INFORMATION FROM THIS INSTRUMENT BEFORE IT IS FILED FOR RECORD IN THE PUBLIC RECORDS:  YOUR SOCIAL SECURITY NUMBER OR YOUR DRIVER’S LICENSE NUMBER.

TABLE OF CONTENTS

PAGE

1.

DEFINITIONS

2.

UNIFORM COMMERCIAL CODE SECURITY AGREEMENT

3.

ASSIGNMENT OF RENTS; APPOINTMENT OF RECEIVER; LENDER IN POSSESSION.

4.

ASSIGNMENT OF LEASES; LEASES AFFECTING THE MORTGAGED PROPERTY.

5.

PAYMENT OF INDEBTEDNESS; PERFORMANCE UNDER LOAN DOCUMENTS; PREPAYMENT PREMIUM  

6.

EXCULPATION

7.

DEPOSITS FOR TAXES, INSURANCE AND OTHER CHARGES

8.

COLLATERAL AGREEMENTS

9.

APPLICATION OF PAYMENTS

10.

COMPLIANCE WITH LAWS

11.

USE OF PROPERTY

12.

PROTECTION OF LENDER'S SECURITY

13.

INSPECTION

14.

BOOKS AND RECORDS; FINANCIAL REPORTING.

15.

TAXES; OPERATING EXPENSES.

16.

LIENS; ENCUMBRANCES

17.

PRESERVATION, MANAGEMENT AND MAINTENANCE OF MORTGAGED PROPERTY

18.

ENVIRONMENTAL HAZARDS.

19.

PROPERTY AND LIABILITY INSURANCE.

20.

CONDEMNATION.

21.

TRANSFERS OF THE MORTGAGED PROPERTY OR INTERESTS IN BORROWER.

22.

EVENTS OF DEFAULT

23.

REMEDIES CUMULATIVE

24.

FORBEARANCE.

25.

INTENTIONALLY DELETED

26.

WAIVER OF STATUTE OF LIMITATIONS

27.

WAIVER OF MARSHALLING

28.

FURTHER ASSURANCES.

29.

ESTOPPEL CERTIFICATE

30.

GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE

31.

NOTICE

32.

SALE OF NOTE; CHANGE IN SERVICER

33.

SINGLE ASSET BORROWER

34.

SUCCESSORS AND ASSIGNS BOUND

35.

JOINT AND SEVERAL LIABILITY

36.

RELATIONSHIP OF PARTIES; NO THIRD PARTY BENEFICIARY.

37.

SEVERABILITY; AMENDMENTS

38.

CONSTRUCTION

39.

LOAN SERVICING

40.

DISCLOSURE OF INFORMATION

41.

NO CHANGE IN FACTS OR CIRCUMSTANCES

42.

SUBROGATION

43.

ACCELERATION; REMEDIES

44.

RELEASE.

45.

TRUSTEE.

46.

VENDOR’S LIEN; RENEWAL AND EXTENSION

47.

NO FIDUCIARY DUTY

48.

FIXTURE FILING

49.

ADDITIONAL PROVISIONS REGARDING ASSIGNMENT OF RENTS

50.

LOAN CHARGES

51.

PROPERTY AND LIABILITY INSURANCE:  DELIVERY OF POLICY TO   LENDER

52.

ENTIRE AGREEMENT.

53.

WAIVER OF TRIAL BY JURY

Vista Village Apartments

MULTIFAMILY DEED OF TRUST,

ASSIGNMENT OF RENTS

SECURITY AGREEMENT AND FIXTURE FILING

THIS MULTIFAMILY DEED OF TRUST, ASSIGNMENT OF RENTS AND SECURITY AGREEMENT (the “Instrument”) is dated as of the 18th day of January, 2007, by VMS NATIONAL PROPERTIES, a joint venture general partnership organized and existing under the laws of Illinois, whose address is c/o AIMCO, Stanford Place 3, 4582 South Ulster Street Parkway, Suite 1100, Denver, Colorado 80237, ("Borrower"), as grantor (“Borrower”), to STEWART TITLE GUARANTY COMPANY, as trustee (“Trustee”), for the benefit of CAPMARK FINANCE INC., a corporation organized and existing under the laws of California, whose address is 116 Welsh Road, Horsham, Pennsylvania 19044, Attn: Servicing-Executive Vice President, as beneficiary (“Lender”).

Borrower, in consideration of the Indebtedness and the trust created by this Instrument, irrevocably grants, conveys and assigns to Trustee, in trust, with power of sale, the Mortgaged Property, including the Land located in the County of El Paso, State of Texas and described in Exhibit A attached to this Instrument.  To have and to hold the Mortgaged Property unto Trustee, Trustee’s successor in trust and Trustee’s assigns forever.

TO SECURE TO LENDER the repayment of the Indebtedness evidenced by Borrower’s Multifamily Note payable to Lender, dated as of the date of this Instrument, and maturing as set forth in the Loan Agreement, in the principal amount of $2,490,138.00, and all renewals, extensions and modifications of the Indebtedness, and the performance of the covenants and agreements of Borrower contained in the Loan Documents.

Borrower warrants and represents that Borrower is lawfully seized of the Mortgaged Property and has the right, power and authority to grant, convey and assign the Mortgaged Property, and that the Mortgaged Property is unencumbered.  Borrower covenants that Borrower will warrant and defend generally the title to the Mortgaged Property against all claims and demands, subject to any easements and restrictions listed in a schedule of exceptions to coverage in any title insurance policy issued to Lender contemporaneously with the execution and recordation of this Instrument and insuring Lender’s interest in the Mortgaged Property.

Covenants.  Borrower and Lender covenant and agree as follows:

1.

1. DEFINITIONS. The following terms, when used in this Instrument (including when used in the above recitals), shall have the following meanings:

(a)

(a) "Borrower" means all persons or entities identified as "Borrower" in the first paragraph of this Instrument, together with their successors and assigns.

(b)

(b) "Collateral Agreement" means any separate agreement between Borrower and Lender for the purpose of establishing replacement reserves for the Mortgaged Property, establishing a fund to assure completion of repairs or improvements specified in that agreement, or assuring reduction of the outstanding principal balance of the Indebtedness if the occupancy of or income from the Mortgaged Property does not increase to a level specified in that agreement, or any other agreement or agreements between Borrower and Lender which provide for the establishment of any other fund, reserve or account.

(c)

(c) "Environmental Permit" means any permit, license, or other authorization issued under any Hazardous Materials Law with respect to any activities or businesses conducted on or in relation to the Mortgaged Property.

(d)   

(d) "Event of Default" means the occurrence of any event listed in Section 22.

(e) "Fixtures" means all property which is so attached to the Land or the Improvements as to constitute a fixture under applicable law, including: machinery, equipment, engines, boilers, incinerators, installed building materials; systems and equipment for the purpose of supplying or distributing heating, cooling, electricity, gas, water, air, or light; antennas, cable, wiring and conduits used in connection with radio, television, security, fire prevention, or fire detection or otherwise used to carry electronic signals; telephone systems and equipment; elevators and related machinery and equipment; fire detection, prevention and extinguishing systems and apparatus; security and access control systems and apparatus; plumbing systems; water heaters, ranges, stoves, microwave ovens, refrigerators, dishwashers, garbage disposers, washers, dryers and other appliances; light fixtures, awnings, storm w indows and storm doors; pictures, screens, blinds, shades, curtains and curtain rods; mirrors; cabinets, paneling, rugs and floor and wall coverings; fences, trees and plants; swimming pools; and exercise equipment.

(f) "Governmental Authority" means any board, commission, department or body of any municipal, county, state or federal governmental unit, or any subdivision of any of them, that has or acquires jurisdiction over the Mortgaged Property or the use, operation or improvement of the Mortgaged Property.

(g) "Hazardous Materials" means petroleum and petroleum products and compounds containing them, including gasoline, diesel fuel and oil; explosives; flammable materials; radioactive materials; polychlorinated biphenyls ("PCBs") and compounds containing them; lead and lead-based paint; asbestos or asbestos-containing materials in any form that is or could become friable; underground or above-ground storage tanks, whether empty or containing any substance; any substance the presence of which on the Mortgaged Property is prohibited by any federal, state or local authority; any substance that requires special handling; and any other material or substance now or in the future defined as a "hazardous substance," "hazardous material," "hazardous waste," "toxic substance," "toxic pollutant," "contaminant," or "pollutant" ; within the meaning of any Hazardous Materials Law.

(h) "Hazardous Materials Laws" means all federal, state, and local laws, ordinances and regulations and standards, rules, policies and other governmental requirements, administrative rulings and court judgments and decrees in effect now or in the future and including all amendments, that relate to Hazardous Materials and apply to Borrower or to the Mortgaged Property. Hazardous Materials Laws include, but are not limited to, the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., the Toxic Substance Control Act, 15 U.S.C. Section 2601, et seq., the Clean Water Act, 33 U.S.C. Section 1251, et seq., and the Hazardous Materials Transportation Act, 49 U.S.C. Section 5101, et seq., and their state analogs.

(i) "Impositions" and "Imposition Deposits" are defined in Section 7(a).

(j) "Improvements" means the buildings, structures, improvements, and alterations now constructed or at any time in the future constructed or placed upon the Land, including any future replacements and additions.

(k) "Indebtedness" means the principal of, interest on, and all other amounts due at any time under, the Note, this Instrument or any other Loan Document, including prepayment premiums, late charges, default interest, and advances as provided in Section 12 to protect the security of this Instrument.

(l) [Intentionally omitted]

(m) "Key Principal" means the natural person(s) or entity identified as such at the foot of this Instrument, and any person or entity who becomes a Key Principal after the date of this Instrument and is identified as such in an amendment or supplement to this Instrument.

(n) "Land" means the land described in Exhibit A.

(o) "Leases" means all present and future leases, subleases, licenses, concessions or grants or other possessory interests now or hereafter in force, whether oral or written, covering or affecting the Mortgaged Property, or any portion of the Mortgaged Property (including proprietary leases or occupancy agreements if Borrower is a cooperative housing corporation), and all modifications, extensions or renewals.

(p) "Lender" means the entity identified as "Lender" in the first paragraph of this Instrument and its successors and assigns, or any subsequent holder of the Note.

(q) "Loan Documents" means the Note, this Instrument, all guaranties, all indemnity agreements, all Collateral Agreements, O&M Programs, and any other documents now or in the future executed by Borrower, Key Principal, any guarantor or any other person in connection with the loan evidenced by the Note, as such documents may be amended from time to time.

(r) "Loan Servicer" means the entity that from time to time is designated by Lender to collect payments and deposits and receive notices under the Note, this Instrument and any other Loan Document, and otherwise to service the loan evidenced by the Note for the benefit of Lender.  Unless Borrower receives notice to the contrary, the Loan Servicer is the entity identified as "Lender" in the first paragraph of this Instrument. 

(s) "Mortgaged Property" means all of Borrower's present and future right, title and interest in and to all of the following:

(1)

the Land;

(2)

the Improvements;

(3)

the Fixtures;

(4)

the Personalty;

(5)

all current and future rights, including air rights, development rights, zoning rights and other similar rights or interests, easements, tenements, rights-of-way, strips and gores of land, streets, alleys, roads, sewer rights, waters, watercourses, and appurtenances related to or benefitting the Land or the Improvements, or both, and all rights-of-way, streets, alleys and roads which may have been or may in the future be vacated;

(6)

all proceeds paid or to be paid by any insurer of the Land, the Improvements, the Fixtures, the Personalty or any other part of the Mortgaged Property, whether or not Borrower obtained the insurance pursuant to Lender’s requirement;

(7)

all awards, payments and other compensation made or to be made by any municipal, state or federal authority with respect to the Land, the Improvements, the Fixtures, the Personalty or any other part of the Mortgaged Property, including any awards or settlements resulting from condemnation proceedings or the total or partial taking of the Land, the

Improvements, the Fixtures, the Personalty or any other part of the Mortgaged Property under the power of eminent domain or otherwise and including any conveyance in lieu thereof;

(8)

all contracts, options and other agreements for the sale of the Land, the Improvements, the Fixtures, the Personalty or any other part of the Mortgaged Property entered into by Borrower now or in the future, including cash or securities deposited to secure performance by parties of their obligations;

(9)

all proceeds from the conversion, voluntary or involuntary, of any of the above into cash or liquidated claims, and the right to collect such proceeds;

(10)

all Rents and Leases;

(11)

all earnings, royalties, accounts receivable, issues and profits from the Land, the Improvements or any other part of the Mortgaged Property, and all undisbursed proceeds of the loan secured by this Instrument and, if Borrower is a cooperative housing corporation, maintenance charges or assessments payable by shareholders or residents;

(12)

all Imposition Deposits;

(13)

all refunds or rebates of Impositions by any municipal, state or federal authority or insurance company (other than refunds applicable to periods before the real property tax year in which this Instrument is dated);

(14)

all tenant security deposits which have not been forfeited by any tenant under any Lease; and

(15)

all names under or by which any of the above Mortgaged Property may be operated or known, and all trademarks, trade names, and goodwill relating to any of the Mortgaged Property.

(t) "Note" means the Multifamily Note described on page 1 of this Instrument, including the Acknowledgement and Agreement of Key Principal to Personal Liability for Exceptions to Non-Recourse Liability (if any), and all schedules, riders, allonges and addenda, as such Multifamily Note may be amended from time to time.

(u) "O&M Program" is defined in Section 18(a).

(v) "Personalty" means all equipment, inventory, general intangibles which are used now or in the future in connection with the ownership, management or operation of the Land or the Improvements or are located on the Land or in the Improvements, including furniture, furnishings, machinery, building materials, appliances, goods, supplies, tools, books, records (whether in written or electronic form), computer equipment (hardware and software) and other tangible personal property (other than Fixtures) which are used now or in the future in connection with the ownership, management or operation of the Land or the Improvements or are located on the Land or in the Improvements, and any operating agreements relating to the Land or the Improvements, and any surveys, plans and specifications and contracts for architectural, engineering and construction services relating to the Land or the Improvements and all other intangible property and rights relating to the operation of, or used in connection with, the Land or the Improvements, including all governmental permits relating to any activities on the Land.

(w) "Property Jurisdiction" is defined in Section 30(a).

(x) "Rents" means all rents (whether from residential or non-residential space), revenues and other income of the Land or the Improvements, including subsidy payments received from any sources (including, but not limited to payments under any Housing Assistance Payments Contract) parking fees, laundry and vending machine income and fees and charges for food, health care and other services provided at the Mortgaged Property, whether now due, past due, or to become due, and deposits forfeited by tenants.

(y) "Taxes" means all taxes, assessments, vault rentals and other charges, if any, general, special or otherwise, including all assessments for schools, public betterments and general or local improvements, which are levied, assessed or imposed by any public authority or quasi-public authority, and which, if not paid, will become a lien, on the Land or the Improvements.

(z) "Transfer" means (A) a sale, assignment, transfer or other disposition (whether voluntary, involuntary or by operation of law); (B) the granting, creating or attachment of a lien, encumbrance or security interest (whether voluntary, involuntary or by operation of law); (C) the issuance or other creation of an ownership interest in a legal entity, including a partnership interest, interest in a limited liability company or corporate stock; (D) the withdrawal, retirement, removal or involuntary resignation of a partner in a partnership or a member or manager in a limited liability company; or (E) the merger, dissolution, liquidation, or consolidation of a legal entity.  "Transfer" does not include (i) a conveyance of the Mortgaged Property at a judicial or non-judicial foreclosure sale under this Instrument or (ii) the Mortgaged Property becoming part of a bank ruptcy estate by operation of law under the United States Bankruptcy Code.  For purposes of defining the term "Transfer," the term "partnership" shall mean a general partnership, a limited partnership, a joint venture and a limited liability partnership, and the term "partner" shall mean a general partner, a limited partner and a joint venturer.

2. UNIFORM COMMERCIAL CODE SECURITY AGREEMENT. This Instrument is also a security agreement under the Uniform Commercial Code for any of the Mortgaged Property which, under applicable law, may be subject to a security interest under the Uniform Commercial Code, whether acquired now or in the future, and all products and cash and non-cash proceeds thereof (collectively, "UCC Collateral"), and Borrower hereby grants to Lender a security interest in the UCC Collateral.  Borrower hereby authorizes Lender to file financing statements, continuation statements and financing statement amendments, in such form as Lender may require to perfect or continue the perfection of this security interest and Borrower agrees, if Lender so requests, to execute and deliver to Lender such financing statements, continuation statements and amendments.  Borrower shall pay all filing costs and all costs and expenses of any record searches for financing statements that Lende r may require.  Without the prior written consent of Lender, Borrower shall not create or permit to exist any other lien or security interest in any of the UCC Collateral.  If an Event of Default has occurred and is continuing, Lender shall have the remedies of a secured party under the Uniform Commercial Code, in addition to all remedies provided by this Instrument or existing under applicable law.  In exercising any remedies, Lender may exercise its remedies against the UCC Collateral separately or together, and in any order, without in any way affecting the availability of Lender's other remedies.  This Instrument constitutes a financing statement with respect to any part of the Mortgaged Property which is or may become a Fixture.

3. ASSIGNMENT OF RENTS; APPOINTMENT OF RECEIVER; LENDER IN POSSESSION.

(a) As part of the consideration for the Indebtedness, Borrower absolutely and unconditionally assigns and transfers to Lender all Rents. It is the intention of Borrower to establish a present, absolute and irrevocable transfer and assignment to Lender of all Rents and to authorize and empower Lender to collect and receive all Rents without the necessity of further action on the part of Borrower.  Promptly upon request by Lender, Borrower agrees to execute and deliver such further assignments as Lender may from time to time require.  Borrower and Lender intend this assignment of Rents to be immediately effective and to constitute an absolute present assignment and not an assignment for additional security only.  For purposes of giving effect to this absolute assignment of Rents, and for no other purpose, Rents shall not be deemed to be a part of the "Mortgaged Property," ; as that term is defined in Section 1(s).  However, if this present, absolute and unconditional assignment of Rents is not enforceable by its terms under the laws of the Property Jurisdiction, then the Rents shall be included as a part of the Mortgaged Property and it is the intention of the Borrower that in this circumstance this Instrument create and perfect a lien on Rents in favor of Lender, which lien shall be effective as of the date of this Instrument.

(b) After the occurrence of an Event of Default, Borrower authorizes Lender to collect, sue for and compromise Rents and directs each tenant of the Mortgaged Property to pay all Rents to, or as directed by, Lender, and Borrower shall, upon Borrower’s receipt of any Rents from any sources (including, but not limited to subsidy payments under any Housing Assistance Payments Contract), pay the total amount of such receipts to the Lender.  However, until the occurrence of an Event of Default, Lender hereby grants to Borrower a revocable license to collect and receive all Rents, to hold all Rents in trust for the benefit of Lender and to apply all Rents to pay the installments of interest and principal then due and payable under the Note and the other amounts then due and payable under the other Loan Documents, including Imposition Deposits, and to pay the current costs and expenses of man aging, operating and maintaining the Mortgaged Property, including utilities, Taxes and insurance premiums (to the extent not included in Imposition Deposits), tenant improvements and other capital expenditures.  So long as no Event of Default has occurred and is continuing, the Rents remaining after application pursuant to the preceding sentence may be retained by Borrower free and clear of, and released from, Lender's rights with respect to Rents under this Instrument.  From and after the occurrence of an Event of Default, and without the necessity of Lender entering upon and taking and maintaining control of the Mortgaged Property directly, or by a receiver, Borrower’s license to collect Rents shall automatically terminate and Lender shall without notice be entitled to all Rents as they become due and payable, including Rents then due and unpaid.  Borrower shall pay to Lender upon demand all Rents to which Lender is entitled.  At any time after the occurrence of an Event of Defaul t, Lender may give, and Borrower hereby irrevocably authorizes Lender to give, notice to all tenants of the Mortgaged Property instructing them to pay all Rents to Lender; provided, however, that the giving of any such notice by Lender shall not affect, in any way, Lender’s entitlement to the Rents as of the date on which the Event of Default occurs.  No tenant shall be obligated to inquire further as to the occurrence or continuance of an Event of Default, and no tenant shall be obligated to pay to Borrower any amounts which are actually paid to Lender in response to such a notice.  Any such notice by Lender shall be delivered to each tenant personally, by mail or by delivering such demand to each rental unit.  Borrower shall not interfere with and shall cooperate with Lender's collection of such Rents.

(c) Borrower represents and warrants to Lender that Borrower has not executed any prior assignment of Rents (other than an assignment of Rents securing indebtedness that will be paid off and discharged with the proceeds of the loan evidenced by the Note), that Borrower has not performed, and Borrower covenants and agrees that it will not perform, any acts and has not executed, and shall not execute, any instrument which would prevent Lender from exercising its rights under this Section 3, and that at the time of execution of this Instrument there has been no anticipation or prepayment of any Rents for more than two months prior to the due dates of such Rents.  Borrower shall not collect or accept payment of any Rents more than two months prior to the due dates of such Rents.

(d) If an Event of Default has occurred and is continuing, Lender may, regardless of the adequacy of Lender's security or the solvency of Borrower and even in the absence of waste, enter upon and take and maintain full control of the Mortgaged Property in order to perform all acts that Lender in its discretion determines to be necessary or desirable for the operation and maintenance of the Mortgaged Property, including the execution, cancellation or modification of Leases, the collection of all Rents, the making of repairs to the Mortgaged Property and the execution or termination of contracts providing for the management, operation or maintenance of the Mortgaged Property, for the purposes of enforcing the assignment of Rents pursuant to Section 3(a), protecting the Mortgaged Property or the security of this Instrument, or for such other purposes as Lender in its discretion may deem necessary or desirable.  Alternatively, if an Event of Default has occurred and is continuing, regardless of the adequacy of Lender's security, without regard to Borrower’s solvency and without the necessity of giving prior notice (oral or written) to Borrower, Lender may apply to any court having jurisdiction for the appointment of a receiver for the Mortgaged Property to take any or all of the actions set forth in the preceding sentence.  If Lender elects to seek the appointment of a receiver for the Mortgaged Property at any time after an Event of Default has occurred and is continuing, Borrower, by its execution of this Instrument, expressly consents to the appointment of such receiver, including the appointment of a receiver ex parte if permitted by applicable law.  Lender or the receiver, as the case may be, shall be entitled to receive a reasonable fee for managing the Mortgaged Property.  Immediately upon appointment of a receiver or immediately upon the Lender's entering upon a nd taking possession and control of the Mortgaged Property, Borrower shall surrender possession of the Mortgaged Property to Lender or the receiver, as the case may be, and shall deliver to Lender or the receiver, as the case may be, all documents, records (including records on electronic or magnetic media), accounts, surveys, plans, and specifications relating to the Mortgaged Property and all security deposits and prepaid Rents.  In the event Lender takes possession and control of the Mortgaged Property, Lender may exclude Borrower and its representatives from the Mortgaged Property.  Borrower acknowledges and agrees that the exercise by Lender of any of the rights conferred under this Section 3 shall not be construed to make Lender a mortgagee-in-possession of the Mortgaged Property so long as Lender has not itself entered into actual possession of the Land and Improvements.

(e) If Lender enters the Mortgaged Property, Lender shall be liable to account only to Borrower and only for those Rents actually received.  Lender shall not be liable to Borrower, anyone claiming under or through Borrower or anyone having an interest in the Mortgaged Property, by reason of any act or omission of Lender under this Section 3, and Borrower hereby releases and discharges Lender from any such liability to the fullest extent permitted by law.

(f) If the Rents are not sufficient to meet the costs of taking control of and managing the Mortgaged Property and collecting the Rents, any funds expended by Lender for such purposes shall become an additional part of the Indebtedness as provided in Section 12.

(g) Any entering upon and taking of control of the Mortgaged Property by Lender or the receiver, as the case may be, and any application of Rents as provided in this Instrument shall not cure or waive any Event of Default or invalidate any other right or remedy of Lender under applicable law or provided for in this Instrument.

4. ASSIGNMENT OF LEASES; LEASES AFFECTING THE MORTGAGED PROPERTY.

(a) As part of the consideration for the Indebtedness, Borrower absolutely and unconditionally assigns and transfers to Lender all of Borrower's right, title and interest in, to and under the Leases, including Borrower's right, power and authority to modify the terms of any such Lease, or extend or terminate any such Lease.  It is the intention of Borrower to establish a present, absolute and irrevocable transfer and assignment to Lender of all of Borrower’s right, title and interest in, to and under the Leases.  Borrower and Lender intend this assignment of the Leases to be immediately effective and to constitute an absolute present assignment and not an assignment for additional security only.  For purposes of giving effect to this absolute assignment of the Leases, and for no other purpose, the Leases shall not be deemed to be a part of the "Mortgaged Property", as that term is defined in Section 1(s).  However, if this present, absolute and unconditional assignment of the Leases is not enforceable by its terms under the laws of the Property Jurisdiction, then the Leases shall be included as a part of the Mortgaged Property and it is the intention of the Borrower that in this circumstance this Instrument create and perfect a lien on the Leases in favor of Lender, which lien shall be effective as of the date of this Instrument.

(b) Until the occurrence of an Event of Default, Borrower shall have all rights, power and authority granted to Borrower under any Lease (except as otherwise limited by this Section or any other provision of this Instrument), including the right, power and authority to modify the terms of any Lease or extend or terminate any Lease.  Upon the occurrence of an Event of Default, the permission given to Borrower pursuant to the preceding sentence to exercise all rights, power and authority under Leases shall automatically terminate.  Borrower shall comply with and observe Borrower's obligations under all Leases, including Borrower's obligations pertaining to the maintenance and disposition of tenant security deposits.

(c) Borrower acknowledges and agrees that the exercise by Lender, either directly or by a receiver, of any of the rights conferred under this Section 4 shall not be construed to make Lender a mortgagee-in-possession of the Mortgaged Property so long as Lender has not itself entered into actual possession of the Land and the Improvements.  The acceptance by Lender of the assignment of the Leases pursuant to Section 4(a) shall not at any time or in any event obligate Lender to take any action under this Instrument or to expend any money or to incur any expenses.  Lender shall not be liable in any way for any injury or damage to person or property sustained by any person or persons, firm or corporation in or about the Mortgaged Property.  Prior to Lender's actual entry into and taking possession of the Mortgaged Property, Lender shall not (i) be obligated to perform any of the terms, covenants and conditions contained in any Lease (or otherwise have any obligation with respect to any Lease); (ii) be obligated to appear in or defend any action or proceeding relating to the Lease or the Mortgaged Property; or (iii) be responsible for the operation, control, care, management or repair of the Mortgaged Property or any portion of the Mortgaged Property.  The execution of this Instrument by Borrower shall constitute conclusive evidence that all responsibility for the operation, control, care, management and repair of the Mortgaged Property is and shall be that of Borrower, prior to such actual entry and taking of possession.

(d) From and after the occurrence of an Event of Default, and without the necessity of Lender entering upon and taking and maintaining control of the Mortgaged Property directly, by a receiver, or by any other manner or proceeding permitted by the laws of the Property Jurisdiction, Lender immediately shall have all rights, powers and authority granted to Borrower under any Lease, including the right, power and authority to modify the terms of any such Lease, or extend or terminate any such Lease.

(e) Borrower shall, promptly upon Lender's request, deliver to Lender an executed copy of each residential Lease then in effect. All Leases for residential dwelling units shall be on forms approved by Lender, shall be for initial terms of at least six months and not more than two years, and shall not include options to purchase.  If customary in the applicable market, residential Leases with terms of less than six months may be permitted with Lender’s prior written consent.

(f) Borrower shall not lease any portion of the Mortgaged Property for non-residential use except with the prior written consent of Lender and Lender's prior written approval of the Lease agreement.  Borrower shall not modify the terms of, or extend or terminate, any Lease for non-residential use (including any Lease in existence on the date of this Instrument) without the prior written consent of Lender.  Borrower shall, without request by Lender, deliver an executed copy of each non-residential Lease to Lender promptly after such Lease is signed.   All non-residential Leases, including renewals or extensions of existing Leases, shall specifically provide that (1) such Leases are subordinate to the lien of this Instrument (unless waived in writing by Lender); (2) the tenant shall attorn to Lender and any purchaser at a foreclosure sale, such attornment to be self-executing and effective upon acquisition of title to the Mortgaged Property by any purchaser at a foreclosure sale or by Lender in any manner; (3) the tenant agrees to execute such further evidences of attornment as Lender or any purchaser at a foreclosure sale may from time to time request; (4) the Lease shall not be terminated by foreclosure or any other transfer of the Mortgaged Property; (5) after a foreclosure sale of the Mortgaged Property, Lender or any other purchaser at such foreclosure sale may, at Lender's or such purchaser's option, accept or terminate such Lease; and (6) the tenant shall, upon receipt after the occurrence of an Event of Default of a written request from Lender, pay all Rents payable under the Lease to Lender.

(g) Borrower shall not receive or accept Rent under any Lease (whether residential or non-residential) for more than two months in advance.

5. PAYMENT OF INDEBTEDNESS; PERFORMANCE UNDER LOAN DOCUMENTS; PREPAYMENT PREMIUM.  Borrower shall pay the Indebtedness when due in accordance with the terms of the Note and the other Loan Documents and shall perform, observe and comply with all other provisions of the Note and the other Loan Documents.  Borrower shall pay a prepayment premium in connection with certain prepayments of the Indebtedness, including a payment made after Lender's exercise of any right of acceleration of the Indebtedness, as provided in the Note.

6. EXCULPATION.  Borrower’s personal liability for payment of the Indebtedness and for performance of the other obligations to be performed by it under this Instrument is limited in the manner, and to the extent, provided in the Note.

7. DEPOSITS FOR TAXES, INSURANCE AND OTHER CHARGES.

(a) Borrower shall deposit with Lender on the day monthly installments of principal or interest, or both, are due under the Note (or on another day designated in writing by Lender), until the Indebtedness is paid in full, an additional amount sufficient to accumulate with Lender the entire sum required to pay, when due (1) any water and sewer charges which, if not paid, may result in a lien on all or any part of the Mortgaged Property, (2) the premiums for fire and other hazard insurance, rent loss insurance and such other insurance as Lender may require under Section 19, (3) Taxes, and (4) amounts for other charges and expenses which Lender at any time reasonably deems necessary to protect the Mortgaged Property, to prevent the imposition of liens on the Mortgaged Property, or otherwise to protect Lender's interests, all as reasonably estimated from time to time by Lender.  The amoun ts deposited under the preceding sentence are collectively referred to in this Instrument as the "Imposition Deposits".  The obligations of Borrower for which the Imposition Deposits are required are collectively referred to in this Instrument as "Impositions".  The amount of the Imposition Deposits shall be sufficient to enable Lender to pay each Imposition before the last date upon which such payment may be made without any penalty or interest charge being added.  Lender shall maintain records indicating how much of the monthly Imposition Deposits and how much of the aggregate Imposition Deposits held by Lender are held for the purpose of paying Taxes, insurance premiums and each other obligation of Borrower for which Imposition Deposits are required. Any waiver by Lender of the requirement that Borrower remit Imposition Deposits to Lender may be revoked by Lender, in Lender's discretion, at any time upon notice to Borrower.

(b) Imposition Deposits shall be held in an institution (which may be Lender, if Lender is such an institution) whose deposits or accounts are insured or guaranteed by a federal agency.  Lender shall not be obligated to open additional accounts or deposit Imposition Deposits in additional institutions when the amount of the Imposition Deposits exceeds the maximum amount of the federal deposit insurance or guaranty.  Lender shall apply the Imposition Deposits to pay Impositions so long as no Event of Default has occurred and is continuing.  Unless applicable law requires, Lender shall not be required to pay Borrower any interest, earnings or profits on the Imposition Deposits.  Borrower hereby pledges and grants to Lender a security interest in the Imposition Deposits as additional security for all of Borrower's obligations under this Instrument and the other Loan Documents.  Any amounts deposited with Lender under this Section 7 shall not be trust funds, nor shall they operate to reduce the Indebtedness, unless applied by Lender for that purpose under Section 7(e).

(c) If Lender receives a bill or invoice for an Imposition, Lender shall pay the Imposition from the Imposition Deposits held by Lender.  Lender shall have no obligation to pay any Imposition to the extent it exceeds Imposition Deposits then held by Lender.  Lender may pay an Imposition according to any bill, statement or estimate from the appropriate public office or insurance company without inquiring into the accuracy of the bill, statement or estimate or into the validity of the Imposition.

(d) If at any time the amount of the Imposition Deposits held by Lender for payment of a specific Imposition exceeds the amount reasonably deemed necessary by Lender, the excess shall be credited against future installments of Imposition Deposits.  If at any time the amount of the Imposition Deposits held by Lender for payment of a specific Imposition is less than the amount reasonably estimated by Lender to be necessary, Borrower shall pay to Lender the amount of the deficiency within 15 days after notice from Lender.

(e) If an Event of Default has occurred and is continuing, Lender may apply any Imposition Deposits, in any amounts and in any order as Lender determines, in Lender's discretion, to pay any Impositions or as a credit against the Indebtedness. Upon payment in full of the Indebtedness, Lender shall refund to Borrower any Imposition Deposits held by Lender.

8. COLLATERAL AGREEMENTS.  Borrower shall deposit with Lender such amounts as may be required by any Collateral Agreement and shall perform all other obligations of Borrower under each Collateral Agreement.

9. APPLICATION OF PAYMENTS.  If at any time Lender receives, from Borrower or otherwise, any amount applicable to the Indebtedness which is less than all amounts due and payable at such time, then Lender may apply that payment to amounts then due and payable in any manner and in any order determined by Lender, in Lender's discretion.  Neither Lender's acceptance of an amount which is less than all amounts then due and payable nor Lender's application of such payment in the manner authorized shall constitute or be deemed to constitute either a waiver of the unpaid amounts or an accord and satisfaction.  Notwithstanding the application of any such amount to the Indebtedness,  Borrower’s obligations under this Instrument and the Note shall remain unchanged.

10. COMPLIANCE WITH LAWS.  Borrower shall comply with all laws, ordinances, regulations and requirements of any Governmental Authority and all recorded lawful covenants and agreements relating to or affecting the Mortgaged Property, including all laws, ordinances, regulations, requirements and covenants pertaining to health and safety, construction of improvements on the Mortgaged Property, fair housing, zoning and land use, and Leases.  Borrower also shall comply with all applicable laws that pertain to the maintenance and disposition of tenant security deposits.  Borrower shall at all times maintain records sufficient to demonstrate  compliance with the provisions of this Section 10.  Borrower shall take appropriate measures to prevent, and shall not engage in or knowingly permit, any illegal activities at the Mortgaged Property that could endanger tenants or visitors, result in damage to the Mortgaged Property, result in forfeiture of the Mortgaged Property, or otherwi se materially impair the lien created by this Instrument or Lender's interest in the Mortgaged Property.  Borrower represents and warrants to Lender that no portion of the Mortgaged Property has been or will be purchased with the proceeds of any illegal activity.

11. USE OF PROPERTY.  Unless required by applicable law, Borrower shall not (a) except for any change in use approved by Lender, allow changes in the use for which all or any part of the Mortgaged Property is being used at the time this Instrument was executed, (b) convert any individual dwelling units or common areas to commercial use, (c) initiate or acquiesce in a change in the zoning classification of the Mortgaged Property, or (d) establish any condominium or cooperative regime with respect to the Mortgaged Property.

12. PROTECTION OF LENDER'S SECURITY.

(a) If Borrower fails to perform any of its obligations under this Instrument or any other Loan Document, or if any action or proceeding is commenced which purports to affect the Mortgaged Property, Lender's security or Lender's rights under this Instrument, including eminent domain, insolvency, code enforcement, civil or criminal forfeiture, enforcement of Hazardous Materials Laws, fraudulent conveyance or reorganizations or proceedings involving a bankrupt or decedent, then Lender at Lender's option may make such appearances, disburse such sums and take such actions as Lender reasonably deems necessary to perform such obligations of Borrower and to protect Lender's interest, including (1) payment of fees and out-of-pocket expenses of attorneys, accountants, inspectors and consultants, (2) entry upon the Mortgaged Property to make repairs or secure the Mortgaged Property, (3) procurement of th e insurance required by Section 19, and (4) payment of amounts which Borrower has failed to pay under Sections 15 and 17.

(b) Any amounts disbursed by Lender under this Section 12, or under any other provision of this Instrument that treats such disbursement as being made under this Section 12, shall be added to, and become part of, the principal component of the Indebtedness, shall be immediately due and payable and shall bear interest from the date of disbursement until paid at the "Default Rate", as defined in the Note.

(c) Nothing in this Section 12 shall require Lender to incur any expense or take any action.

13. INSPECTION.  Lender, its agents, representatives, and designees may make or cause to be made entries upon and inspections of the Mortgaged Property (including environmental inspections and tests) during normal business hours, or at any other reasonable time.

14. BOOKS AND RECORDS; FINANCIAL REPORTING.

(a) Borrower shall keep and maintain at all times at the Mortgaged Property or the management agent's offices, and upon Lender's request shall make available at the Mortgaged Property, complete and accurate books of account and records (including copies of supporting bills and invoices) adequate to reflect correctly the operation of the Mortgaged Property, and copies of all written contracts, Leases, and other instruments which affect the Mortgaged Property.  The books, records, contracts, Leases and other instruments shall be subject to examination and inspection at any reasonable time by Lender.

(b) Borrower shall furnish to Lender all of the following:

(1)

within 120 days after the end of each fiscal year of Borrower, a statement of income and expenses for Borrower's operation of the Mortgaged Property for that fiscal year, a statement of changes in financial position of Borrower relating to the Mortgaged Property for that fiscal year and, when requested by Lender, a balance sheet showing all assets and liabilities of Borrower relating to the Mortgaged Property as of the end of that fiscal year;

(2)

within 120 days after the end of each fiscal year of Borrower, and at any other time upon Lender's request, a rent schedule for the Mortgaged Property showing the name of each tenant, and for each tenant, the space occupied, the lease expiration date, the rent payable for the current month, the date through which rent has been paid, and any related information requested by Lender;

(3)

within 120 days after the end of each fiscal year of Borrower, and at any other time upon Lender's request, an accounting of all security deposits held pursuant to all Leases, including the name of the institution (if any) and the names and identification numbers of the accounts (if any) in which such security deposits are held and the name of the person to contact at such financial institution, along with any authority or release necessary for Lender to access information regarding such accounts;

(4)

within 120 days after the end of each fiscal year of Borrower, and at any other time upon Lender's request, a statement that identifies all owners of any interest in Borrower and the interest held by each, if Borrower is a corporation, all officers and directors of Borrower, and if Borrower is a limited liability company, all managers who are not members;

(5)

upon Lender's request, a monthly property management report for the Mortgaged Property, showing the number of inquiries made and rental applications received from tenants or prospective tenants and deposits received from tenants and any other information requested by Lender;

(6)

upon Lender's request, a balance sheet, a statement of income and expenses for Borrower and a statement of changes in financial position of Borrower for Borrower's most recent fiscal year; and

(7)

if required by Lender, a statement of income and expense for the Mortgaged Property for the prior month or quarter.

(c) Each of the statements, schedules and reports required by Section 14(b) shall be certified to be complete and accurate by an individual having authority to bind Borrower, and shall be in such form and contain such detail as Lender may reasonably require.  Lender also may require that any statements, schedules or reports be audited at Borrower's expense by independent certified public accountants acceptable to Lender.

(d) If Borrower fails to provide in a timely manner the statements, schedules and reports required by Section 14(b), Lender shall have the right to have Borrower's books and records audited, at Borrower’s expense, by independent certified public accountants selected by Lender in order to obtain such statements, schedules and reports, and all related costs and expenses of Lender shall become immediately due and payable and shall become an additional part of the Indebtedness as provided in Section 12.

(e) If an Event of Default has occurred and is continuing, Borrower shall deliver to Lender upon written demand all books and records relating to the Mortgaged Property or its operation.

(f) Borrower authorizes Lender to obtain a credit report on Borrower at any time.

(g) If an Event of Default has occurred and Lender has not previously required Borrower to furnish a quarterly statement of income and expense for the Mortgaged Property, Lender may require Borrower to furnish such a statement within 45 days after the end of each fiscal quarter of Borrower following such Event of Default.

15. TAXES; OPERATING EXPENSES.

(a) Subject to the provisions of Section 15(c) and Section 15(d), Borrower shall pay, or cause to be paid, all Taxes when due and before the addition of any interest, fine, penalty  or cost for nonpayment.

(b) Subject to the provisions of Section 15(c), Borrower shall pay the expenses of operating, managing, maintaining and repairing the Mortgaged Property (including insurance premiums, utilities, repairs and replacements) before the last date upon which each such payment may be made without any penalty or interest charge being added.

(c) As long as no Event of Default exists and Borrower has timely delivered to Lender any bills or premium notices that it has received, Borrower shall not be obligated to pay Taxes, insurance premiums or any other individual Imposition to the extent that sufficient Imposition Deposits are held by Lender for the purpose of paying that specific Imposition.  If an Event of Default exists, Lender may exercise any rights Lender may have with respect to Imposition Deposits without regard to whether Impositions are then due and payable.  Lender shall have no liability to Borrower for failing to pay any Impositions to the extent that any Event of Default has occurred and is continuing, insufficient Imposition Deposits are held by Lender at the time an Imposition becomes due and payable or Borrower has failed to provide Lender with bills and premium notices as provided above.

(d) Borrower, at its own expense, may contest by appropriate legal proceedings, conducted diligently and in good faith, the amount or validity of any Imposition other than insurance premiums, if (1) Borrower notifies Lender of the commencement or expected commencement of such proceedings, (2) the Mortgaged Property is not in danger of being sold or forfeited, (3) Borrower deposits with Lender reserves sufficient to pay the contested Imposition, if requested by Lender, and (4) Borrower furnishes whatever additional security is required in the proceedings or is reasonably requested by Lender, which may include the delivery to Lender of the reserves established by Borrower to pay the contested Imposition.

(e) Borrower shall promptly deliver to Lender a copy of all notices of, and invoices for, Impositions, and if Borrower pays any Imposition directly, Borrower shall promptly furnish to Lender receipts evidencing such payments.

16. LIENS; ENCUMBRANCES.  Borrower acknowledges that, to the extent provided in Section 21, the grant, creation or existence of any mortgage, deed of trust, deed to secure debt, security interest or other lien or encumbrance (a "Lien") on the Mortgaged Property (other than the lien of this Instrument) or on certain ownership interests in Borrower, whether voluntary, involuntary or by operation of law, and whether or not such Lien has priority over the lien of this Instrument, is a "Transfer" which constitutes an Event of Default.

17. PRESERVATION, MANAGEMENT AND MAINTENANCE OF MORTGAGED PROPERTY.

(a) Borrower (1) shall not commit waste or permit impairment or deterioration of the Mortgaged Property, (2) shall not abandon the Mortgaged Property, (3) shall restore or repair promptly, in a good and workmanlike manner, any damaged part of the Mortgaged Property to the equivalent of its original condition, or such other condition as Lender may approve in writing, whether or not insurance proceeds or condemnation awards are available to cover any costs of such restoration or repair, (4) shall keep the Mortgaged Property in good repair, including the replacement of Personalty and Fixtures with items of equal or better function and quality, (5) shall provide for professional management of the Mortgaged Property by a residential rental property manager satisfactory to Lender under a contract approved by Lender in writing, and (6) shall give notice to Lender of and, unless otherwise directed in w riting by Lender, shall appear in and defend any action or proceeding purporting to affect the Mortgaged Property, Lender's security or Lender's rights under this Instrument.  Borrower shall not (and shall not permit any tenant or other person to) remove, demolish or alter the Mortgaged Property or any part of the Mortgaged Property except in connection with the replacement of tangible Personalty.

(b) If, in connection with the making of the loan evidenced by the Note or at any later date, Lender waives in writing the requirement of Section 17(a)(5) above that Borrower enter into a written contract for management of the Mortgaged Property and if, after the date of this Instrument, Borrower intends to change the management of the Mortgaged Property, Lender shall have the right to approve such new property manager and the written contract for the management of the Mortgaged Property and require that Borrower and such new property manager enter into an Assignment of Management Agreement on a form approved by Lender.  If required by Lender (whether before or after an Event of Default), Borrower will cause any Affiliate of Borrower to whom fees are payable for the management of the Mortgaged Property to enter into an agreement with Lender, in a form approved by Lender, providing for subo rdination of those fees and such other provisions as Lender may require.  "Affiliate of Borrower" means any corporation, partnership, joint venture, limited liability company, limited liability partnership, trust or individual controlled by, under common control with, or which controls Borrower (the term "control" for these purposes shall mean the ability, whether by the ownership of shares or other equity interests, by contract or otherwise, to elect a majority of the directors of a corporation, to make management decisions on behalf of, or independently to select the managing partner of, a partnership, or otherwise to have the power independently to remove and then select a majority of those individuals exercising managerial authority over an entity, and control shall be conclusively presumed in the case of the ownership of 50% or more of the equity interests).

18. ENVIRONMENTAL HAZARDS.

(a) Except for matters covered by a written program of operations and maintenance approved in writing by Lender (an "O&M Program") or matters described in Section 18(b), Borrower shall not cause or permit any of the following:

(1)

the presence, use, generation, release, treatment, processing, storage (including storage in above ground and underground storage tanks), handling, or disposal of any Hazardous Materials on or under the Mortgaged Property or any other  property of Borrower that is adjacent to the Mortgaged Property;

(2)

the transportation of any Hazardous Materials to, from, or across the Mortgaged Property;

(3)

any occurrence or condition on the Mortgaged Property or any other property of Borrower that is adjacent to the Mortgaged Property, which occurrence or condition is or may be in violation of Hazardous Materials Laws; or

(4)

any violation of or noncompliance with the terms of any Environmental Permit with respect to the Mortgaged Property or any  property of Borrower that is adjacent to the Mortgaged Property.

The matters described in clauses (1) through (4) above are referred to collectively in this Section 18 as "Prohibited Activities or Conditions".

(b) Prohibited Activities and Conditions shall not include the safe and lawful use and storage of quantities of (1) pre-packaged supplies, cleaning materials and petroleum products customarily used in the operation and maintenance of comparable multifamily properties, (2) cleaning materials, personal grooming items and other items sold in pre-packaged containers for consumer use and used by tenants and occupants of residential dwelling units in the Mortgaged Property; and (3) petroleum products used in the operation and maintenance of motor vehicles from time to time located on the Mortgaged Property’s parking areas, so long as all of the foregoing are used, stored, handled, transported and disposed of in compliance with Hazardous Materials Laws.

(c) Borrower shall take all commercially reasonable actions (including the inclusion of appropriate provisions in any Leases executed after the date of this Instrument) to prevent its employees, agents, and contractors, and all tenants and other occupants from causing or permitting any Prohibited Activities or Conditions.  Borrower shall not lease or allow the sublease or use of all or any portion of the Mortgaged Property to any tenant or subtenant for nonresidential use by any user that, in the ordinary course of its business, would cause or permit any Prohibited Activity or Condition.

(d) If an O&M Program has been established with respect to Hazardous Materials, Borrower shall comply in a timely manner with, and cause all employees, agents, and contractors of Borrower and any other persons present on the Mortgaged Property to comply with the O&M Program.  All costs of performance of Borrower's obligations under any O&M Program shall be paid by Borrower, and Lender's out-of-pocket costs incurred in connection with the monitoring and review of the O&M Program and Borrower's performance shall be paid by Borrower upon demand by Lender.  Any such out-of-pocket costs of Lender which Borrower fails to pay promptly shall become an additional part of the Indebtedness as provided in Section 12.

(e) Borrower represents and warrants to Lender that, except as previously disclosed by Borrower to Lender in writing:

(1)

Borrower has not at any time engaged in, caused or permitted any Prohibited Activities or Conditions;

(2)

to the best of Borrower's knowledge after reasonable and diligent inquiry, no Prohibited Activities or Conditions exist or have existed;

(3)

except to the extent previously disclosed by Borrower to Lender in writing, the Mortgaged Property does not now contain any underground storage tanks, and, to the best of Borrower’s knowledge after reasonable and diligent inquiry, the Mortgaged Property has not contained any underground storage tanks in the past.  If there is an underground storage tank located on the Property which has been previously disclosed by Borrower to Lender in writing, that tank complies with all requirements of Hazardous Materials Laws;

(4)

Borrower has complied with all Hazardous Materials Laws, including all requirements for notification regarding releases of Hazardous Materials.  Without limiting the generality of the foregoing, Borrower has obtained all Environmental Permits required for the operation of the Mortgaged Property in accordance with Hazardous Materials Laws now in effect and all such Environmental Permits are in full force and effect;  

(5)

no event has occurred with respect to the Mortgaged Property that constitutes, or with the passing of time or the giving of notice would constitute, noncompliance with the terms of any Environmental Permit;

(6)

there are no actions, suits, claims or proceedings pending or, to the best of Borrower’s knowledge after reasonable and diligent inquiry, threatened  that involve the Mortgaged Property and allege, arise out of, or relate to any Prohibited Activity or Condition; and

(7)

Borrower has not received any complaint, order, notice of violation or other communication from any Governmental Authority with regard to air emissions, water discharges, noise emissions or Hazardous Materials, or any other environmental, health or safety matters affecting the Mortgaged Property or any other property of Borrower that is adjacent to the Mortgaged Property.

The representations and warranties in this Section 18 shall be continuing representations and warranties that shall be deemed to be made by Borrower throughout the term of the loan evidenced by the Note, until the Indebtedness has been paid in full.

(f) Borrower shall promptly notify Lender in writing upon the occurrence of any of  the following events:

(1)

Borrower's discovery of any Prohibited Activity or Condition;

(2)

Borrower’s receipt of or knowledge of any complaint, order, notice of violation or other communication from any Governmental Authority or other person with regard to present or future alleged Prohibited Activities or Conditions or any other environmental, health or safety matters affecting the Mortgaged Property or any other property of Borrower that is adjacent to the Mortgaged Property; and  

(3)

any representation or warranty in this Section 18 becomes untrue after the date of this Agreement.

Any such notice given by Borrower shall not relieve Borrower of, or result in a waiver of, any obligation under this Instrument, the Note, or any other Loan Document.

(g) Borrower shall pay promptly the costs of any environmental inspections, tests or audits ("Environmental Inspections") required by Lender in connection with any foreclosure or deed in lieu of foreclosure, or as a condition of Lender’s consent to any Transfer under Section 21, or required by Lender following a reasonable determination by Lender that Prohibited Activities or Conditions may exist.  Any such costs incurred by Lender (including the fees and out-of-pocket costs of attorneys and technical consultants whether incurred in connection with any judicial or administrative process or otherwise) which Borrower fails to pay promptly shall become an additional part of the Indebtedness as provided in Section 12.  The results of all Environmental Inspections made by Lender shall at all times remain the property of Lender and Lender shall have no obligation to disclose or otherwise make available to Borrower or any other party such results or any other information obtained by Lender in connection with its Environmental Inspections.  Lender hereby reserves the right, and Borrower hereby expressly authorizes Lender, to make available to any party, including any prospective bidder at a foreclosure sale of the Mortgaged Property, the results of any Environmental Inspections made by Lender with respect to the Mortgaged Property.  Borrower consents to Lender notifying any party (either as part of a notice of sale or otherwise) of the results of any of Lender's Environmental Inspections.  Borrower acknowledges that Lender cannot control or otherwise assure the truthfulness or accuracy of the results of any of its Environmental Inspections and that the release of such results to prospective bidders at a foreclosure sale of the Mortgaged Property may have a material and adverse effect upon the amount which a party may bid at such sale.  Borrower agrees that Lender shall have no liability whatsoever as a result of delivering the results of any of its Environmental Inspections to any third party, and Borrower hereby releases and forever discharges Lender from any and all claims, damages, or causes of action, arising out of, connected with or incidental to the results of, the delivery of any of Lender's Environmental Inspections.

(h) If any investigation, site monitoring, containment, clean-up, restoration or other remedial work ("Remedial Work") is necessary to comply with any Hazardous Materials Law or order of any Governmental Authority that has or acquires jurisdiction over the Mortgaged Property  or the use, operation or improvement of the Mortgaged Property under any Hazardous Materials Law, Borrower shall, by the earlier of (1) the applicable deadline required by Hazardous Materials Law or (2) 30 days after notice from Lender demanding such action, begin performing the Remedial Work, and thereafter diligently prosecute it to completion, and shall in any event complete the work by the time required by applicable Hazardous Materials Law.  If Borrower fails to begin on a timely basis or diligently prosecute any required Remedial Work, Lender may, at its option, cause the Remedial Work to be completed, in whic h case Borrower shall reimburse Lender on demand for the cost of doing so.  Any reimbursement due from Borrower to Lender shall become part of the Indebtedness as provided in Section 12.

(i) Borrower shall cooperate with any inquiry by any Governmental Authority and shall comply with any governmental or judicial order which arises from any alleged Prohibited Activity or Condition.

(j) Borrower shall indemnify, hold harmless and defend (i) Lender, (ii) any prior owner or holder of the Note, (iii) the Loan Servicer, (iv) any prior Loan Servicer, (v) the officers, directors, shareholders, partners, employees and trustees of any of the foregoing, and (vi) the heirs, legal representatives, successors and assigns of each of the foregoing (collectively, the "Indemnitees") from and against all proceedings, claims, damages, penalties and costs (whether initiated or sought by Governmental Authorities or private parties), including fees and out-of-pocket expenses of attorneys and expert witnesses, investigatory fees, and remediation costs, whether incurred in connection with any judicial or administrative process or otherwise, arising directly or indirectly from any of the following:

(1)

any breach of any representation or warranty of Borrower in this Section 18;  

(2)

any failure by Borrower to perform any of its obligations under this Section 18;

(3)

the existence or alleged existence of any Prohibited Activity or Condition;

(4)

the presence or alleged presence of Hazardous Materials on or under the Mortgaged Property or any property of Borrower that is adjacent to the Mortgaged Property; and

(5)

the actual or alleged violation of any Hazardous Materials Law.

(k) Counsel selected by Borrower to defend Indemnitees shall be subject to the  approval of those Indemnitees.  However, any Indemnitee may elect to defend any claim or legal or administrative proceeding at the Borrower’s expense.

(l) Borrower shall not, without the prior written consent of those Indemnitees who are named as parties to a claim or legal or administrative proceeding (a "Claim"), settle or compromise the Claim if the settlement (1) results in the entry of any judgment that does not include as an unconditional term the delivery by the claimant or plaintiff to Lender of a written release of those Indemnitees, satisfactory in form and substance to Lender; or (2) may materially and adversely affect Lender, as determined by Lender in its discretion.

(m) Lender agrees that the indemnity under this Section 18 shall be limited to the assets of Borrower and Lender shall not seek to recover any deficiency from any natural persons who are general partners of Borrower.

(n) Borrower shall, at its own cost and expense, do all of the following:

(1)

pay or satisfy any judgment or decree that may be entered against any Indemnitee or Indemnitees in any legal or administrative proceeding incident to any matters against which Indemnitees are entitled to be indemnified under this Section 18;

(2)

reimburse Indemnitees for any expenses paid or incurred in connection with any matters against which Indemnitees are entitled to be indemnified under this Section 18; and

(3)

reimburse Indemnitees for any and all expenses, including fees and out-of-pocket expenses of attorneys and expert witnesses, paid or incurred in connection with the enforcement by Indemnitees of their rights under this Section 18, or in monitoring and participating in any legal or administrative proceeding.

(o) In any circumstances in which the indemnity under this Section 18 applies, Lender may employ its own legal counsel and consultants to prosecute, defend or negotiate any claim or legal or administrative proceeding and Lender, with the prior written consent of Borrower (which shall not be unreasonably withheld, delayed or conditioned), may settle or compromise any action or legal or administrative proceeding.  Borrower shall reimburse Lender upon demand for all costs and expenses incurred by Lender, including all costs of settlements entered into in good faith, and the fees and out-of-pocket expenses of such attorneys and consultants.

(p) The provisions of this Section 18 shall be in addition to any and all other obligations and liabilities that Borrower may have  under applicable law or under other Loan Documents, and each Indemnitee shall be entitled to indemnification under this Section 18 without regard to whether Lender or that Indemnitee has exercised any rights against the Mortgaged Property or any other security, pursued any rights against any guarantor, or pursued any other rights available under the Loan Documents or applicable law. If Borrower consists of more than one person or entity, the obligation of those persons or entities to indemnify the Indemnitees under this Section 18 shall be joint and several. The obligation of Borrower to indemnify the Indemnitees under this Section 18 shall survive any repayment or discharge of the Indebtedness, any foreclosure proceeding, any foreclosure s ale, any delivery of any deed in lieu of foreclosure, and any release of record of the lien of this Instrument.

19. PROPERTY AND LIABILITY INSURANCE.

(a) Borrower shall keep the Improvements insured at all times against such hazards as Lender may from time to time require, which insurance shall include but not be limited to coverage against loss by fire and allied perils, general boiler and machinery coverage, and business income coverage.  Lender’s insurance requirements may change from time to time throughout the term of the Indebtedness.  If Lender so requires, such insurance shall also include sinkhole insurance, mine subsidence insurance, earthquake insurance, and, if the Mortgaged Property does not conform to applicable zoning or land use laws, building ordinance or law coverage.  If any of the Improvements is located in an area identified by the Federal Emergency Management Agency (or any successor to that agency) as an area having special flood hazards, and if flood insurance is available in that area, Borrower sh all insure such Improvements against loss by flood.

(b) All premiums on insurance policies required under Section 19(a) shall be paid in the manner provided in Section 7, unless Lender has designated in writing another method of payment.  All such policies shall also be in a form approved by Lender.  All policies of property damage insurance shall include a non-contributing, non-reporting mortgage clause in favor of, and in a form approved by, Lender.  Lender shall have the right to hold the original policies or duplicate original policies of all insurance required by Section 19(a).  Borrower shall promptly deliver to Lender a copy of all renewal and other notices received by Borrower with respect to the policies and all receipts for paid premiums.  At least 30 days prior to the expiration date of a policy, Borrower shall deliver to Lender the original  (or a duplicate original) of a renewal policy in form satisfactory to Lender.

(c) Borrower shall maintain at all times commercial general liability insurance, workers’ compensation insurance and such other liability, errors and omissions and fidelity insurance coverages as Lender may from time to time require.

(d) All insurance policies and renewals of insurance policies required by this Section 19 shall be in such amounts and for such periods as Lender may from time to time require, and shall be issued by insurance companies satisfactory to Lender.

(e) Borrower shall comply with all insurance requirements and shall not permit any condition to exist on the Mortgaged Property that would invalidate any part of any insurance coverage that this Instrument requires Borrower to maintain.

(f) In the event of loss, Borrower shall give immediate written notice to the insurance carrier and to Lender.  Borrower hereby authorizes and appoints Lender as attorney-in-fact for Borrower to make proof of loss, to adjust and compromise any claims under policies of property damage insurance, to appear in and prosecute any action arising from such property damage insurance policies, to collect and receive the proceeds of property damage insurance, and to deduct from such proceeds Lender’s expenses incurred in the collection of such proceeds.  This power of attorney is coupled with an interest and therefore is irrevocable.  However, nothing contained in this Section 19 shall require Lender to incur any expense or take any action.  Lender may, at Lender’s option, (1) hold the balance of such proceeds to be used to reimburse Borrower for the cost of restoring a nd repairing the Mortgaged Property to the equivalent of its original condition or to a condition approved by Lender (the "Restoration"), or (2) apply the balance of such proceeds to the payment of the Indebtedness, whether or not then due. To the extent Lender determines to apply insurance proceeds to Restoration, Lender shall do so in accordance with Lender’s then-current policies relating to the restoration of casualty damage on similar multifamily properties.

(g) Lender shall not exercise its option to apply insurance proceeds to the payment of the Indebtedness if all of the following conditions are met:  (1) no Event of Default (or any event which, with the giving of notice or the passage of time, or both, would constitute an Event of Default) has occurred and is continuing; (2) Lender determines, in its discretion, that there will be sufficient funds to complete the Restoration; (3) Lender determines, in its discretion, that the rental income from the Mortgaged Property after completion of the Restoration will be sufficient to meet all operating costs and other expenses, Imposition Deposits, deposits to reserves and loan repayment obligations relating to the Mortgaged Property; (4) Lender determines, in its discretion, that the Restoration will be completed before the earlier of (A) one year before the maturity date of the Note or (B) one yea r after the date of the loss or casualty; and (5) upon Lender's request, Borrower provides Lender evidence of the availability during and after the Restoration of the insurance required to be maintained by Borrower pursuant to this Section 19.

(h) If the Mortgaged Property is sold at a foreclosure sale or Lender acquires title to the Mortgaged Property, Lender shall automatically succeed to all rights of Borrower in and to any insurance policies and unearned insurance premiums and in and to the proceeds resulting from any damage to the Mortgaged Property prior to such sale or acquisition.

20. CONDEMNATION.

(a) Borrower shall promptly notify Lender of any action or proceeding relating to any condemnation or other taking, or conveyance in lieu thereof, of all or any part of the Mortgaged Property, whether direct or indirect (a "Condemnation").  Borrower shall appear in and prosecute or defend any action or proceeding relating to any Condemnation unless otherwise directed by Lender in writing.  Borrower authorizes and appoints Lender as attorney-in-fact for Borrower to commence, appear in and prosecute, in Lender’s or Borrower’s name, any action or proceeding relating to any Condemnation and to settle or compromise any claim in connection with any Condemnation.  This power of attorney is coupled with an interest and therefore is irrevocable.  However, nothing contained in this Section 20 shall require Lender to incur any expense or take any action.  Borrower hereby transfers and assigns to Lender all right, title and interest of Borrower in and to any award or payment with respect to (i) any Condemnation, or any conveyance in lieu of Condemnation, and (ii) any damage to the Mortgaged Property caused by governmental action that does not result in a Condemnation.

(b) Lender may apply such awards or proceeds, after the deduction of Lender’s expenses incurred in the collection of such amounts, at Lender’s option, to the restoration or repair of the Mortgaged Property or to the payment of the Indebtedness, with the balance, if any, to Borrower.  Unless Lender otherwise agrees in writing, any application of any awards or proceeds to the Indebtedness shall not extend or postpone the due date of any monthly installments referred to in the Note, Section 7 of this Instrument or any Collateral Agreement, or change the amount of such installments.  Borrower agrees to execute such further evidence of assignment of any awards or proceeds as Lender may require.

21. TRANSFERS OF THE MORTGAGED PROPERTY OR INTERESTS IN BORROWER.

(a) The occurrence of any of the following events shall constitute an Event of Default under this Instrument:

(1)

a Transfer of all or any part of the Mortgaged Property or any interest in the Mortgaged Property;

(2)

a Transfer of a Controlling Interest in Borrower;

(3)

a Transfer of a Controlling Interest in any entity which owns, directly or indirectly through one or more intermediate entities, a Controlling Interest in Borrower;

(4)

a Transfer of all or any part of Key Principal's ownership interests (other than limited partnership interests) in Borrower, or in any other entity which owns, directly or indirectly through one or more intermediate entities, an ownership interest in Borrower;

(5)

if Key Principal is an entity, (A) a Transfer of a Controlling Interest in Key Principal, or (B) a Transfer of a Controlling Interest in any entity which owns, directly or indirectly through one or more intermediate entities, a Controlling Interest in Key Principal;

(6)

if Borrower or Key Principal is a trust, the termination or revocation of such trust; and

(7)

a conversion of Borrower from one type of legal entity into another type of legal entity, whether or not there is a Transfer.

Lender shall not be required to demonstrate any actual impairment of its security or any increased risk of default in order to exercise any of its remedies with respect to an Event of Default under this Section 21.

(b) The occurrence of any of the following events shall not constitute an Event of Default under this Instrument, notwithstanding any provision of Section 21(a) to the contrary:

(1)

a Transfer to which Lender has consented;

(2)

a Transfer that occurs by devise, descent, or by operation of law upon the death of a natural person;

(3)

the grant of a leasehold interest in an individual dwelling unit for a term of two years or less not containing an option to purchase;

(4)

a Transfer of obsolete or worn out Personalty or Fixtures that are contemporaneously replaced by items of equal or better function and quality, which are free of liens, encumbrances and security interests other than those created by the Loan Documents or consented to by Lender;

(5)

the grant of an easement, if before the grant Lender determines that the easement will not materially affect the operation or value of the Mortgaged Property or Lender’s interest in the Mortgaged Property, and Borrower pays to Lender, upon demand, all costs and expenses incurred by Lender in connection with reviewing Borrower’s request; and

(6)

the creation of a tax lien or a mechanic’s, materialman’s or judgment lien against the Mortgaged Property which is bonded off, released of record or otherwise remedied to Lender’s satisfaction within 30 days of the date of creation.

(c) Lender shall consent, without any adjustment to the rate at which the Indebtedness secured by this Instrument bears interest or to any other economic terms of the Indebtedness, to a Transfer that would otherwise violate this Section 21 if, prior to the Transfer, Borrower has satisfied each of the following requirements:

(1)

the submission to Lender of all information required by Lender to make the determination required by this Section 21(c);

(2)

the absence of any Event of Default;

(3)

the transferee meets all of the eligibility, credit, management and other standards (including any standards with respect to previous relationships between Lender and the transferee and the organization of the transferee) customarily applied by Lender at the time of the proposed Transfer to the approval of borrowers in connection with the origination or purchase of similar mortgages, deeds of trust or deeds to secure debt on multifamily properties;

(4)

the Mortgaged Property, at the time of the proposed Transfer, meets all standards as to its physical condition that are customarily applied by Lender at the time of the proposed Transfer to the approval of properties in connection with the origination or purchase of similar mortgages on multifamily properties;

(5)

in the case of a Transfer of all or any part of the Mortgaged Property, or direct or indirect ownership interests in Borrower or Key Principal (if an entity), if transferor or any other person has obligations under any Loan Document, the execution by the transferee or one or more individuals or entities acceptable to Lender of an assumption agreement (including, if applicable, an Acknowledgement and Agreement of Key Principal to Personal Liability for Exceptions to Non-Recourse Liability) that is acceptable to Lender and that, among other things, requires the transferee to perform all obligations of transferor or such person set forth in such Loan Document, and may require that the transferee comply with any provisions of this Instrument or any other Loan Document which previously may have been waived by Lender;

(6)

if a guaranty has been executed and delivered in connection with the Note, this Instrument or any of the other Loan Documents, the Borrower causes one or more individuals or entities acceptable to Lender to execute and deliver to Lender a guaranty in a form acceptable to Lender; and

(7)

Lender’s receipt of all of the following:

(A)

a non-refundable review fee in the amount of $3,000 and a transfer fee equal to 1 percent of the outstanding Indebtedness immediately prior to the Transfer.

(B)

In addition, Borrower shall be required to reimburse Lender for all of Lender's out-of-pocket costs (including reasonable attorneys’ fees) incurred in reviewing the Transfer request, to the extent such expenses exceed $3,000.

(d) For purposes of this Section, the following terms shall have the meanings set forth below:

(1)

"Initial Owners" means, with respect to Borrower or any other entity, the persons or entities who on the date of the Note own in the aggregate 100% of the ownership interests in Borrower or that entity.

(2)

A Transfer of a "Controlling Interest" shall mean, with respect to any entity, the following:

(i)

if such entity is a general partnership or a joint venture, a Transfer of any general partnership interest or joint venture interest which would cause the Initial Owners to own less than 51% of all general partnership or joint venture interests in such entity;

(ii)

if such entity is a limited partnership, a Transfer of any general partnership interest;

(iii)

if such entity is a limited liability company or a limited liability partnership, a Transfer of any membership or other ownership interest which would cause the Initial Owners to own less than 51% of all membership or other ownership interests in such entity;

(iv)

if such entity is a corporation (other than a Publicly-Held Corporation) with only one class of voting stock, a Transfer of any voting stock which would cause the Initial Owners to own less than 51% of voting stock in such corporation;

(v)

if such entity is a corporation (other than a Publicly-Held Corporation) with more than one class of voting stock, a Transfer of any voting stock which would cause the Initial Owners to own less than a sufficient number of shares of voting stock having the power to elect the majority of directors of such corporation; and

(vi)

if such entity is a trust, the removal, appointment or substitution of a trustee of such trust other than (A) in the case of a land trust, or (B) if the trustee of such trust after such removal, appointment or substitution is a trustee identified in the trust agreement approved by Lender.

(3)

"Publicly-Held Corporation" shall mean a corporation the outstanding voting stock of which is registered under Section 12(b) or 12(g) of the Securities and Exchange Act of 1934, as amended.

22. EVENTS OF DEFAULT.  The occurrence of any one or more of the following shall constitute an Event of Default under this Instrument:

(a) any failure by Borrower to pay or deposit when due any amount required by the Note, this Instrument or any other Loan Document;

(b)

any failure by Borrower to maintain the insurance coverage required by Section 19;

(c) any failure by Borrower to comply with the provisions of Section 33;

(d) fraud or material misrepresentation or material omission by Borrower, or any of its officers, directors, trustees, general partners or managers, Key Principal or any guarantor in connection with (A) the application for or creation of the Indebtedness, (B) any financial statement, rent roll, or other report or information provided to Lender during the term of the Indebtedness, or (C) any request for Lender’s consent to any proposed action, including a request for disbursement of funds under any Collateral Agreement;

(e)

(e) any Event of Default under Section 21;

(f) the commencement of a forfeiture action or proceeding, whether civil or criminal, which, in Lender’s reasonable judgment, could result in a forfeiture of the Mortgaged Property or otherwise materially impair the lien created by this Instrument or Lender’s interest in the Mortgaged Property;

(g) any failure by Borrower to perform any of its obligations under this Instrument (other than those specified in Sections 22(a) through (f)), as and when required, which continues for a period of 30 days after notice of such failure by Lender to Borrower, but no such notice or grace period shall apply in the case of any such failure which could, in Lender’s judgment, absent immediate exercise by Lender of a right or remedy under this Instrument, result in harm to Lender, impairment of the Note or this Instrument or any other security given under any other Loan Document;

(h) any failure by Borrower to perform any of its obligations as and when required under any Loan Document other than this Instrument which continues beyond the applicable cure period, if any, specified in that Loan Document; and

(i) any exercise by the holder of any other debt instrument secured by a mortgage, deed of trust or deed to secure debt on the Mortgaged Property of a right to declare all amounts due under that debt instrument immediately due and payable.

23. REMEDIES CUMULATIVE.  Each right and remedy provided in this Instrument is distinct from all other rights or remedies under this Instrument or any other Loan Document or afforded by applicable law, and each shall be cumulative and may be exercised concurrently, independently, or successively, in any order.

24. FORBEARANCE.

(a) Lender may (but shall not be obligated to) agree with Borrower, from time to time, and without giving notice to, or obtaining the consent of, or having any effect upon the obligations of, any guarantor or other third party obligor, to take any of the following actions:  extend the time for payment of all or any part of the Indebtedness; reduce the payments due under this Instrument, the Note, or any other Loan Document; release anyone liable for the payment of any amounts under this Instrument, the Note, or any other Loan Document; accept a renewal of the Note; modify the terms and time of payment of the Indebtedness; join in any extension or subordination agreement; release any Mortgaged Property; take or release other or additional security; modify the rate of interest or period of amortization of the Note or change the amount of the monthly installments payable under the Note; and otherwise modify this Instrument, the Note, or any other Loan Document.

(b) Any forbearance by Lender in exercising any right or remedy under the Note, this Instrument, or any other Loan Document or otherwise afforded by applicable law, shall not be a waiver of or preclude the exercise of any other right or remedy.  The acceptance by Lender of payment of all or any part of the Indebtedness after the due date of such payment, or in an amount which is less than the required payment, shall not be a waiver of Lender’s right to require prompt payment when due of all other payments on account of the Indebtedness or to exercise any remedies for any failure to make prompt payment. Enforcement by Lender of any security for the Indebtedness shall not constitute an election by Lender of remedies so as to preclude the exercise of any other right available to Lender.  Lender’s receipt of any awards or proceeds under Sections 19 and 20 shall not operate to cure or waive any Even t of Default.

25. [INTENTIONALLY DELETED].  See Section 50.

26. WAIVER OF STATUTE OF LIMITATIONS.  Borrower hereby waives the right to assert any statute of limitations as a bar to the enforcement of the lien of this Instrument or to any action brought to enforce any Loan Document.

27. WAIVER OF MARSHALLING. Notwithstanding the existence of any other security interests in the Mortgaged Property held by Lender or by any other party, Lender shall have the right to determine the order in which any or all of the Mortgaged Property shall be subjected to the remedies provided in this Instrument, the Note, any other Loan Document or applicable law.  Lender shall have the right to determine the order in which any or all portions of the Indebtedness are satisfied from the proceeds realized upon the exercise of such remedies.  Borrower and any party who now or in the future acquires a security interest in the Mortgaged Property and who has actual or constructive notice of this Instrument waives any and all right to require the marshalling of assets or to require that any of the Mortgaged Property be sold in the inverse order of alienation or that any of the Mortgaged Property be sold in parcels or as an entirety in connection with the exercise of any of the remedies permitted by applicable law or provided in this Instrument.

28. FURTHER ASSURANCES.  Borrower shall execute, acknowledge, and deliver, at its sole cost and expense, all further acts, deeds, conveyances, assignments, estoppel certificates, financing statements, transfers and assurances as Lender may require from time to time in order to better assure, grant, and convey to Lender the rights intended to be granted, now or in the future, to Lender under this Instrument and the Loan Documents.

29. ESTOPPEL CERTIFICATE.  Within 10 days after a request from Lender, Borrower shall deliver to Lender a written statement, signed and acknowledged by Borrower, certifying to Lender or any person designated by Lender, as of the date of such statement, (i) that the Loan Documents are unmodified and in full force and effect  (or, if there have been modifications, that the Loan Documents are in full force and effect as modified and setting forth such modifications); (ii) the unpaid principal balance of the Note; (iii) the date to which interest under the Note has been paid; (iv) that Borrower is not in default in paying the Indebtedness or in performing or observing any of the covenants or agreements contained in this Instrument or any of the other Loan Documents (or, if the Borrower is in default, describing such default in reasonable detail); (v) whether or not there are then existing any setoffs or defenses known to Borrower against the enforcement of any right or remedy of Lender under the Loan Documents; and (vi) any additional facts requested by Lender.

30. GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE.

(a) This Instrument, and any Loan Document which does not itself expressly identify the law that is to apply to it, shall be governed by the laws of the jurisdiction in which the Land is located (the "Property Jurisdiction").

(b) Borrower agrees that any controversy arising under or in relation to the Note, this Instrument, or any other Loan Document shall be litigated exclusively in the Property Jurisdiction.  The state and federal courts and authorities with jurisdiction in the Property Jurisdiction shall have exclusive jurisdiction over all controversies which shall arise under or in relation to the Note, any security for the Indebtedness, or any other Loan Document.  Borrower irrevocably consents to service, jurisdiction, and venue of such courts for any such litigation and waives any other venue to which it might be entitled by virtue of domicile, habitual residence or otherwise.

31. NOTICE.

(a) All notices, demands and other communications ("notice") under or concerning this Instrument shall be in writing.  Each notice shall be addressed to the intended recipient at its address set forth in this Instrument, and shall be deemed given on the earliest to occur of (1) the date when the notice is received by the addressee; (2) the first Business Day after the notice is delivered to a recognized overnight courier service, with arrangements made for payment of charges for next Business Day delivery; or (3) the third Business Day after the notice is deposited in the United States mail with postage prepaid, certified mail, return receipt requested.  As used in this Section 31, the term "Business Day" means any day other than a Saturday, a Sunday or any other day on which Lender is not open for business.

(b) Any party to this Instrument may change the address to which notices intended for it are to be directed by means of notice given to the other party in accordance with this Section 31.  Each party agrees that it will not refuse or reject delivery of any notice given in accordance with this Section 31, that it will acknowledge, in writing, the receipt of any notice upon request by the other party and that any notice rejected or refused by it shall be deemed for purposes of this Section 31 to have been received by the rejecting party on the date so refused or rejected, as conclusively established by the records of the U.S. Postal Service or the courier service.

(c) Any notice under the Note and any other Loan Document which does not specify how notices are to be given shall be given in accordance with this Section 31.

32. SALE OF NOTE; CHANGE IN SERVICER.  The Note or a partial interest in the Note (together with this Instrument and the other Loan Documents) may be sold one or more times without prior notice to Borrower.  A sale may result in a change of the Loan Servicer.  There also may be one or more changes of the Loan Servicer unrelated to a sale of the Note.  If there is a change of the Loan Servicer, Borrower will be given notice of the change.

33. SINGLE ASSET BORROWER.   Until the Indebtedness is paid in full, Borrower (a) shall not acquire any real or personal property other than the Mortgaged Property and personal property related to the operation and maintenance of the Mortgaged Property;  (b) shall not operate any business other than the management and operation of the Mortgaged Property; and (c) shall not maintain its assets in a way difficult to segregate and identify.

34. SUCCESSORS AND ASSIGNS BOUND.  This Instrument shall bind, and the rights granted by this Instrument shall inure to, the respective successors and assigns of Lender and Borrower.  However, a Transfer not permitted by Section 21 shall be an Event of Default.

35. JOINT AND SEVERAL LIABILITY.  If more than one person or entity signs this Instrument as Borrower, the obligations of such persons and entities shall be joint and several.

36. RELATIONSHIP OF PARTIES; NO THIRD PARTY BENEFICIARY.

(a) The relationship between Lender and Borrower shall be solely that of creditor and debtor, respectively, and nothing contained in this Instrument shall create any other relationship between Lender and Borrower.

(b) No creditor of any party to this Instrument and no other person shall be a third party beneficiary of this Instrument or any other Loan Document.  Without limiting the generality of the preceding sentence, (1) any arrangement (a "Servicing Arrangement") between the Lender and any Loan Servicer for loss sharing or interim advancement of funds shall constitute a contractual obligation of such Loan Servicer that is independent of theobligation of Borrower for the payment of the Indebtedness, (2) Borrower shall not be a third party beneficiary of any Servicing Arrangement, and (3) no payment by the Loan Servicer under any Servicing Arrangement will reduce the amount of the Indebtedness.

37. SEVERABILITY; AMENDMENTS.  The invalidity or unenforceability of any provision of this Instrument shall not affect the validity or enforceability of any other provision, and all other provisions shall remain in full force and effect.  This Instrument contains the entire agreement among the parties as to the rights granted and the obligations assumed in this Instrument.  This Instrument may not be amended or modified except by a writing signed by the party against whom enforcement is sought.

38. CONSTRUCTION.  The captions and headings of the sections of this Instrument are for convenience only and shall be disregarded in construing this Instrument.  Any reference in this Instrument to an "Exhibit" or a "Section" shall, unless otherwise explicitly provided, be construed as referring, respectively, to an Exhibit attached to this Instrument or to a Section of this Instrument.  All Exhibits attached to or referred to in this Instrument are incorporated by reference into this Instrument.  Any reference in this Instrument to a statute or regulation shall be construed as referring to that statute or regulation as amended from time to time.  Use of the singular in this Agreement includes the plural and use of the plural includes the singular.  As used in this Instrument, the term "including" means "including, but not limited to."

39. LOAN SERVICING.  All actions regarding the servicing of the loan evidenced by the Note, including the collection of payments, the giving and receipt of notice, inspections of the Property, inspections of books and records, and the granting of consents and approvals, may be taken by the Loan Servicer unless Borrower receives notice to the contrary.  If Borrower receives conflicting notices regarding the identity of the Loan Servicer or any other subject, any such notice from Lender shall govern.

40. DISCLOSURE OF INFORMATION.  Lender may furnish information regarding Borrower or the Mortgaged Property to third parties with an existing or prospective interest in the servicing, enforcement, evaluation, performance, purchase or securitization of the Indebtedness, including trustees, master servicers, special servicers, rating agencies, and organizations maintaining databases on the underwriting and performance of multifamily mortgage loans.  Borrower irrevocably waives any and all rights it may have under applicable law to prohibit such disclosure, including any right of privacy.

41. NO CHANGE IN FACTS OR CIRCUMSTANCES.  All information in the application for the loan submitted to Lender (the "Loan Application") and in all financial statements, rent rolls, reports, certificates and other documents submitted in connection with the Loan Application are complete and accurate in all material respects.  There has been no material adverse change in any fact or circumstance that would make any such information incomplete or inaccurate.

42. SUBROGATION.  If, and to the extent that, the proceeds of the loan evidenced by the Note are used to pay, satisfy or discharge any obligation of Borrower for the payment of money that is secured by a pre-existing mortgage, deed of trust or other lien encumbering the Mortgaged Property (a "Prior Lien"), such loan proceeds shall be deemed to have been advanced by Lender at Borrower’s request, and Lender shall automatically, and without further action on its part, be subrogated to the rights, including lien priority, of the owner or holder of the obligation secured by the Prior Lien, whether or not the Prior Lien is released.

43. ACCELERATION REMEDIES. At any time during the existence of an Event of Default, Lender, at Lender's option, may declare the Indebtedness to be immediately due and payable without further demand, and may invoke the power of sale and any other remedies permitted by Texas law or provided in the Instrument or in any other Loan Document.

Borrower acknowledges that the power of sale granted in this Instrument may be exercised by Lender without prior judicial hearing.  Lender shall be entitled to collect all costs and expenses incurred in pursuing such remedies, including attorneys’ fees, costs of documentary evidence, abstracts and title reports.

If Lender invokes the power of sale, Lender may, by and through the Trustee, or otherwise, sell or offer for sale the Mortgaged Property in such portions, order and parcels as Lender may determine, with or without having first taken possession of the Mortgaged Property, to the highest bidder for cash at public auction.  Such sale shall be made at the courthouse door of the county in which all or any part of the Land to be sold is situated (whether the parts or parcel, if any, situated in different counties are contiguous or not, and without the necessity of having any Personalty present at such sale) on the first Tuesday of any month between the hours of 10:00 a.m. and 4:00 p.m., after advertising the time, place and terms of sale and that portion of the Mortgaged Property to be sold by posting or causing to be posted written or printed notice of sale at least twenty-one (21) days before the date of the sale at the courthouse door of the county in which the sale is to be made and at the courthouse door of any other county in which a portion of the Land may be situated, and by filing such notice with the County Clerk(s) of the county(s) in which all or a portion of the Land may be situated, which notice may be posted and filed by the Trustee acting, or by any person acting for the Trustee, and Lender has, at least twenty-one (21) days before the date of the sale, served written or printed notice of the proposed sale by certified mail on each debtor obligated to pay the Indebtedness according to Lender’s records by the deposit of such notice, enclosed in a postpaid wrapper, properly addressed to such debtor at debtor’s most recent address as shown by Lender’s records, in a post office or official depository under the care and custody of the United States Postal Service.  The affidavit of any person having knowledge of the facts to the effect that such service was completed sha ll be prima facie evidence of the fact of service.

Trustee shall deliver to the purchaser at the sale, within a reasonable time after the sale, a deed conveying the Mortgaged Property so sold in fee simple with covenants of general warranty.  Borrower covenants and agrees to defend generally the purchaser’s title to the Mortgaged Property against all claims and demands.  The recitals in Trustee’s deed shall be prima facie evidence of the truth of the statements contained in those recitals.  Trustee shall apply the proceeds of the sale in the following order:  (a) to all reasonable costs and expenses of the sale, including reasonable Trustee’s fees and attorneys’ fees and costs of title evidence; (b) to the Indebtedness in such order as Lender, in Lender’s discretion, directs; and (c) the excess, if any, to the person or persons legally entitled to the excess.

If all or any part of the Mortgaged Property is sold pursuant to this Section 43, Borrower will be divested of any and all interest and claim to the Mortgaged Property, including any interest or claim to all insurance policies, utility deposits, bonds, loan commitments and other intangible property included as a part of the Mortgaged Property.  Additionally, after a sale of all or any part of the Land, Improvements, Fixtures and Personalty, Borrower will be considered a tenant at sufferance of the purchaser of the same, and the purchaser shall be entitled to immediate possession of such property.  If Borrower shall fail to vacate the Mortgaged Property immediately, the purchaser may and shall have the right, without further notice to Borrower, to go into any justice court in any precinct or county in which the Mortgaged Property is located and file an action in forcible entry and detain er, which action shall lie against Borrower or its assigns or legal representatives, as a tenant at sufferance.  This remedy is cumulative of any and all remedies the purchaser may have under this Instrument or otherwise.

In any action for a deficiency after a foreclosure under this Instrument, if any person against whom recovery is sought requests the court in which the action is pending to determine the fair market value of the Mortgaged Property, as of the date of the foreclosure sale, the following shall be the basis of the court’s determination of fair market value:

(a) the Mortgaged Property shall be valued “as is” and in its condition as of the date of foreclosure, and no assumption of increased value because of post-foreclosure repairs, refurbishment, restorations or improvements shall be made;

(b) any adverse effect on the marketability of title because of the foreclosure or because of any other title condition not existing as of the date of this Instrument shall be considered;

(c) the valuation of the Mortgaged Property shall be based upon an assumption that the foreclosure purchaser desires a prompt resale of the Mortgaged Property for cash within a six month-period after foreclosure;

(d) although the Mortgaged Property may be disposed of more quickly by the foreclosure purchaser, the gross valuation of the Mortgaged Property as of the date of foreclosure shall be discounted for a hypothetical reasonable holding period (not to exceed 6 months) at a monthly rate equal to the average monthly interest rate on the Note for the twelve months before the date of foreclosure;

(e) the gross valuation of the Mortgaged Property as of the date of foreclosure shall be further discounted and reduced by reasonable estimated costs of disposition, including brokerage commissions, title policy premiums, environmental assessment and clean-up costs, tax and assessment, prorations, costs to comply with legal requirements and attorneys’ fees;

(f) expert opinion testimony shall be considered only from a licensed appraiser certified by the State of Texas and, to the extent permitted under Texas law, a member of the Appraisal Institute, having at least five years’ experience in appraising property similar to the Mortgaged Property in the county where the Mortgaged Property is located, and who has conducted and prepared a complete written appraisal of the Mortgaged Property taking into considerations the factors set forth in this Instrument; no expert opinion testimony shall be considered without such written appraisal;

(g) evidence of comparable sales shall be considered only if also included in the expert opinion testimony and written appraisal referred to in the preceding paragraph; and

(h) an affidavit executed by Lender to the effect that the foreclosure bid accepted by Trustee was equal to or greater than the value of the Mortgaged Property determined by Lender based upon the factors and methods set forth in subparagraphs (a) through (g) above before the foreclosure shall constitute prima facie evidence that the foreclosure bid was equal to or greater than the fair market value of the Mortgaged Property on the foreclosure date.

Lender may, at Lender’s option, comply with these provisions in the manner permitted or required by Title 5, Section 51.002 of the Texas Property Code (relating to the sale of real estate) or by Chapter 9 of the Texas Business and Commerce Code (relating to the sale of collateral after default by a debtor), as those titles and chapters now exist or may be amended or succeeded in the future, or by any other present or future articles or enactments relating to same subject.  Unless expressly excluded, the Mortgaged Property shall include Rents collected before a foreclosure sale, but attributable to the period following the foreclosure sale, and Borrower shall pay such Rents to the purchaser at such sale.  At any such sale:

(a)

whether made under the power contained in this Instrument, Section 51.002, the Texas Business and Commerce Code, any other legal requirement or by virtue of any judicial proceedings or any other legal right, remedy or recourse, it shall not be necessary for Trustee to have physically present, or to have constructive possession of, the Mortgaged Property (Borrower shall deliver to Trustee any portion of the Mortgaged Property not actually or constructively possessed by Trustee immediately upon demand by Trustee) and the title to and right of possession of any such property shall pass to the purchaser as completely as if the property had been actually present and delivered to the purchaser at the sale;

(b)

each instrument of conveyance executed by Trustee shall contain a general warranty of title, binding upon Borrower;

(c)

the recitals contained in any instrument of conveyance made by Trustee shall conclusively establish the truth and accuracy of the matters recited in the Instrument, including nonpayment of the Indebtedness and the advertisement and conduct of the sale in the manner provided in this Instrument and otherwise by law and the appointment of any successor Trustee;

(d)

all prerequisites to the validity of the sale shall be conclusively presumed to have been satisfied;

(e)

the receipt of Trustee or of such other party or officer making the sale shall be sufficient to discharge to the purchaser or purchasers for such purchaser(s)’ purchase money, and no such purchaser or purchasers, or such purchaser(s)’ assigns or personal representatives, shall thereafter be obligated to see to the application of such purchase money or be in any way answerable for any loss, misapplication or nonapplication of such purchase money;

(f)

to the fullest extent permitted by law, Borrower shall be completely and irrevocably divested of all of Borrower’s right, title, interest, claim and demand whatsoever, either at law or in equity, in and to the property sold, and such sale shall be a perpetual bar to any claim to all or any part of the property sold, both at law and in equity, against Borrower and against any person claiming by, through or under Borrower; and

(g)

to the extent and under such circumstances as are permitted by law, Lender may be a purchaser at any such sale.

44.RELEASE.  Upon payment of the Indebtedness, Lender shall release this Instrument.  Borrower shall pay Lender’s reasonable costs incurred in releasing this Instrument.

45. TRUSTEE.

(a) Trustee may resign by giving of notice of such resignation in writing to Lender.  If Trustee shall die, resign or become disqualified from acting under this Instrument or shall fail or refuse to act in accordance with this Instrument when requested by Lender or if for any reason and without cause Lender shall prefer to appoint a substitute trustee to act instead of the original Trustee named in this Instrument or any prior successor or substitute trustee, Lender shall have full power to appoint a substitute trustee and, if preferred, several substitute trustees in succession who shall succeed to all the estate, rights, powers and duties of the original Trustee named in this Instrument.  Such appointment may be executed by an authorized officer, agent or attorney-in-fact of Lender (whether acting pursuant to a power of attorney or otherwise), and such appointment shall be conclusively presumed to be executed with authority and shall be valid and sufficient without proof of any action by L ender.

(b) Any successor Trustee appointed pursuant to this Section shall, without any further act, deed or conveyance, become vested with all the estates, properties, rights, powers and trusts of the predecessor Trustee with like effect as if originally named as Trustee in this Instrument; but, nevertheless, upon the written request of Lender or such successor Trustee, the Trustee ceasing to act shall execute and deliver an instrument transferring to such successor Trustee, all the estates, properties, rights, powers and trusts of the Trustee so ceasing to act, and shall duly assign, transfer and deliver any of the property and monies held by the Trustee ceasing to act to the successor Trustee.

(c) Trustee may authorize one or more parties to act on Trustee’s behalf to perform the ministerial functions required of Trustee under this Instrument, including the transmittal and posting of any notices.

46. VENDOR’S LIEN; RENEWAL AND EXTENSION.  The Note is in renewal and extension, but not in extinguishment, of the following indebtedness:  N/A.

47. NO FIDUCIARY DUTY.  Lender owes no fiduciary or other special duty to Borrower.

48. FIXTURE FILING.  This Instrument is also a fixture filing under the Uniform Commercial Code of Texas.

49. ADDITIONAL PROVISIONS REGARDING ASSIGNMENT OF RENTS.  In no event shall the assignment of Rents or Leases in Section 3 and Section 4 cause the Indebtedness to be reduced by an amount greater than the Rents actually received by Lender and applied by Lender to the Indebtedness, whether before, during or after (i) an Event of Default, or (ii) a suspension or revocation of the license granted to Borrower in Section 3(c) with regard to the Rents.  Borrower and Lender specifically intend that the assignment of Rents and Leases in Section 3 and Section 4 is not intended to result in a pro tanto reduction of the Indebtedness.  The assignment of Rents and Leases in Section 3 and Section 4 is not intended to constitute a payment of, or with respect to, the Indebtedness and, therefore, Borrower and Lender specifically intend that the Indebtedness shall not be reduced by the value of the Rents and Leases assigned.  Such reduction shall occur only if, and to the extent that, Lender actually receives Rents pursuant to Section 3 and applies such Rents to the Indebtedness.  Borrower agrees that the value of the license granted with regard to the Rents equals the value of the absolute assignment of Rents to Lender.  The assignment of Rents contained in Section 3 shall terminate upon the release of this Instrument.

50. LOAN CHARGES.  Borrower and Lender intend at all times to comply with the laws of the State of Texas governing the maximum rate or amount of interest payable on or in connection with the Indebtedness (or applicable United States federal law to the extent that it permits Lender to contract for, charge, take, reserve or receive a greater amount of interest than under Texas law).  If the applicable law is ever judicially interpreted so as to render usurious any amount payable under the Note, this Instrument or any other Loan Document, or contracted for, charged, taken, reserved or received with respect to the Indebtedness, or if acceleration of the maturity of the Indebtedness, or if any prepayment by Borrower results in Borrower having paid any interest in excess of that permitted by any applicable law, then Borrower and Lender expressly intend that all excess amounts collected by Lender shall be applied to reduce the unpaid principal balance of the Indebtedness (or, if the Indebtedness ha s been or would thereby be paid in full, shall be refunded to Borrower), and the provisions of the Note, this Instrument and the other Loan Documents immediately shall be deemed reformed and the amounts thereafter collectible under the Loan Documents reduced, without the necessity of the execution of any new documents, so as to comply with any applicable law, but so as to permit the recovery of the fullest amount otherwise payable under the Loan Documents.  The right to accelerate the maturity of the Indebtedness does not include the right to accelerate any interest which has not otherwise accrued on the date of such acceleration, and Lender does not intend to collect any unearned interest in the event of acceleration.  All sums paid or agreed to be paid to Lender for the use, forbearance or detention of the Indebtedness shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full term of the Indebtedness until payment in full so that the rate o r amount of interest on account of the Indebtedness does not exceed the applicable usury ceiling.  Notwithstanding any provision contained in the Note, this Instrument or any other Loan Document that permits the compounding of interest, including any provision by which any accrued interest is added to the principal amount of the Indebtedness, the total amount of interest that Borrower is obligated to pay and Lender is entitled to receive with respect to the Indebtedness shall not exceed the amount calculated on a simple (i.e., noncompounded) interest basis at the maximum rate on principal amounts actually advanced to or for the account of Borrower, including all current and prior advances and any advances made pursuant to the Instrument or any other Loan Document (such as for the payment of Impositions and similar expenses or costs).

51. PROPERTY AND LIABILITY INSURANCE:  DELIVERY OF POLICY TO LENDER..  Notwithstanding the provisions of Section 19(b), Borrower shall not be required to deliver the original (or a duplicate original) of any renewal policy of insurance to Lender more than 15 days prior to the expiration date of the policy then held by Lender.

52. ENTIRE AGREEMENT.  THIS INSTRUMENT, THE NOTE AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

53. WAIVER OF TRIAL BY JURY.  BORROWER AND LENDER EACH (A) COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS INSTRUMENT OR THE RELATIONSHIP BETWEEN THE PARTIES AS BORROWER AND LENDER THAT IS TRIABLE OF RIGHT BY A JURY AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO SUCH ISSUE TO THE EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN THE FUTURE.  THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL.

ATTACHED EXHIBITS.  The following Exhibits are attached to this Instrument:

X	Exhibit A	Description of the Land (required)
X	Exhibit B	Modifications to Instrument

IN WITNESS WHEREOF, Borrower has signed and delivered this Instrument or has caused this Instrument to be signed and delivered by its duly authorized representative.

VMS NATIONAL PROPERTIES, an Illinois joint venture general partnership

By:  VMS National Residential Portfolio I, an Illinois limited partnership, its joint venture partner

By:  Maeril, Inc., a Delaware corporation, its general partner

By: /s/Patti K. Fielding

Patti K. Fielding

Executive Vice President and Treasurer

By:  VMS National Residential Portfolio II, an Illinois limited partnership, its joint venture partner

By:  Maeril, Inc., a Delaware corporation, its general partner

By: /s/Patti K. Fielding

Patti K. Fielding

Executive Vice President and Treasurer

EXHIBIT A

[DESCRIPTION OF THE LAND]

EXHIBIT B

Modifications to Security Instrument

The following modifications are made to the text of the Instrument that precedes this Exhibit:

1.

Paragraph 7 is amended to add the following subparagraph:

(f)

Notwithstanding the provisions of Subparagraph 7(a), Lender will not require Borrower to deposit with Lender amounts sufficient to accumulate with Lender the entire sum required to pay Taxes, provided that Borrower delivers to Lender a letter of credit and opinion of the letter of credit issuer’s counsel, both in form and content satisfactory to Lender in its sole discretion, in an amount equal to one (1) year’s Taxes.  In the event that Borrower does not timely pay Taxes or fails to provide Lender with proof of such payment, Lender shall have the right to (i) cash the letter of credit and apply the proceeds of the same to the payment of Taxes, (ii) deposit any proceeds in excess of the amount of Taxes then due and payable into Lender’s account for Imposition Deposits and (iii) require Borrower to deposit with Lender Imposition Deposits as provided in Subpar agraph 7(a).

2.

Paragraph 18(a) is amended to add the following sections:

(5)

the presence of any form of toxic mold or fungus in the Mortgaged Property of a type which may pose a significant risk to human health or the environment or would negatively impact the value of the Mortgaged Property (collectively “Mold”);

(6)

any activity, condition, event or omission that causes the growth of Mold on or in the Mortgaged Property.

3.

The defined term “Prohibited Activities or Conditions” is amended to include the matters described in Sections 18(a)(5) and 18(a)(6).

4.

A new Section 21(a)(8) is added as follows:

(8)

if, at any time, AIMCO REIT loses the authority or the ownership interests necessary to control, either directly or indirectly, Borrower and Guarantor and Borrower’s and Grantor’s Controlling Entities (“AIMCO Authorization”), Grantor covenants to send notice of such loss of AIMCO Authorization to Lender within fifteen (15) business days.  Such loss of AIMCO Authorization, shall be deemed a Transfer hereunder, and such Transfer shall constitute an Event of Default under Section 21(a) unless AIMCO REIT regains such AIMCO Authorization within sixty (60) days after the date of the loss.

5.

Section 33 is amended by adding the following sentences at the end of such Section:

“Borrower has disclosed to and provided Lender with information relating to assets it currently owns in addition to the Mortgaged Property (the “Disclosed Assets”).  Lender acknowledges that Borrower is not a single asset entity and agrees that Borrower may continue to own and operate the Disclosed Assets until September 30, 2007.  Until the Indebtedness is paid in full, Borrower (a) shall not acquire any real or personal property other than (i) the Mortgaged Property, (ii) the Disclosed Assets, (iii) personal property related to the operation and maintenance of the Mortgaged Property and the Disclosed Assets, and (iv) personal property and residences used primarily for the personal use of the Borrower and their family; (b) shall not operate any business other

than the management and operation of the Mortgaged Property and the Disclosed Assets; (c) shall not maintain its assets in a way which is difficult to segregate and identify and (d) grant, create or permit the existence of any new or additional mortgage, deed of trust, deed to secure debt or other lien encumbrance on any of the Disclosed Assets, the Mortgaged Property or ownership interest in the Borrower, whether voluntary, involuntary or by operation of law.  In the event the Property shall be transferred, the single asset requirements of the original Section 33 of this Instrument shall apply for any transferee.”

6.

The following new Section is added at the end of the Instrument after the last numbered Section, but there are no Sections between the last numbered Section and Section 55:

“55.  CONVEYANCE.

No later than September 30, 2007, Borrower shall convey all of its interest in the Mortgaged Property (the “Conveyance”) to a Lender-approved, single-asset, single purpose entity.  Failure to complete the Conveyance shall constitute an event of default under Section 22 of the Security Instrument.

The documents evidencing the Conveyance shall be submitted to Lender for review prior to the Conveyance, and shall be in form and substance satisfactory to Lender.  Borrower agrees to pay all costs incurred in connection with the Conveyance; including, without limitation, the legal fees, if any, of Lender’s attorneys in connection with the required review and approval and the endorsement to the Lender’s title insurance policy.

Completion of the Conveyance shall be evidenced by submission to Lender of the recorded conveyance documents and an endorsement to the Lender’s title insurance policy.

It is understood that no transfer or application fee shall be due in connection with the Conveyance, and that the Conveyance shall not be deemed to violate Section 21 of the Security Instrument respecting Transfers.”

7.

AIMCO STANDARD.

A.

Section 1(v) is modified to read as follows:

(v)

"Personalty" means all furniture, furnishings, equipment, machinery, building materials, appliances, goods, supplies, tools, books, records (whether in written or electronic form), computer equipment (hardware and software) and other tangible personal property (other than Fixtures) which are used now or in the future exclusively in connection with the ownership, management or operation of the Land or the Improvements or are located on the Land or in the Improvements, and any operating agreements relating to the Land or the Improvements, and any surveys, plans and specifications and contracts for architectural, engineering and construction services relating to the Land or the Improvements and all other intangible property and rights exclusively relating to the operation of, or used exclusively in connection with, the Land or the Improvements including all governmental permits relating to any activities on the Land.

B.

Section 7(c) is modified to read as follows:

(c)

Notwithstanding the provisions of  Section 7(a), Lender will not require Borrower to deposit with Lender amounts sufficient to accumulate with Lender the entire sum required to pay the water and sewer charges, fire, hazard or other insurance premiums, and ground rents.  At least annually, Borrower must provide Lender with proof of payment of all such Impositions for which Lender is not collecting Imposition Deposits.  In the event that Borrower does not timely pay any of the Impositions, or fails to provide Lender with proof of such payment, or upon the occurrence of an Event of Default hereunder, or upon Borrower’s failure to maintain the Mortgaged Property in a satisfactory manner in accordance with the requirements of this Instrument, then in any such events, Lender may require Borrower to deposit with Lender the Imposition Deposits as provided in Section 7(a).

C.

Except in a case where Lender in its discretion determines that an emergency exists, Lender may take actions specified in Section 12(a) only if Lender has notified Borrower of Borrower's failure to perform any of its obligations under this Instrument or any other Loan Document and Borrower does not cure the failure within ten (10) days after such notice.  If Lender so determines that an emergency exists, Lender shall notify Borrower of the action taken within ten (10) days after the action is taken.

D.

Sections 14(b)(4) and 14(b)(5) are modified to read as follows:

(4)

within 120 days after the end of each fiscal year of Borrower, and at any other time upon Lender's request, a statement that identifies all owners of any interest in Borrower and each general partner in Borrower, and confirming that the ownership of each other Controlling Entity has not changed in a manner that violates Section 21(a);

(5)

promptly following Lender's request, quarterly or monthly income and expense statements for the Property relating to a quarterly or monthly period, as the case may be, ending no later than 45 days before the request;

E.

For purposes of Section 14(b), Borrower shall be deemed to have delivered any statement or document "upon Lender's request" if Borrower has delivered the document promptly following Lender's request.

F.

Notwithstanding Section (14)(c), unless an Event of Default has occurred and is continuing, or Lender has determined that an event having a Material Adverse Effect has occurred, Lender may require that the financial statements required by Sections 14(b)(1), 14(b)(2) and 14(b)(3) be audited, but may not require that any other financial statements required by Section 14 be audited.  Certification of a statement by the chief financial officer of the entity that is the subject of the statement or, in the case of a partnership, the chief financial officer of the general partner, will be acceptable to Lender as certification by an individual having authority to bind Borrower.

G.

Lender shall not have Borrower's books and records audited pursuant to Section 14(d) unless Lender has given Borrower notice specifying the statements, schedules and reports required by Section 14(b) that Borrower has failed to provide, and Borrower has not provided such statements by the expiration of ten days after such notice.

H.

So long as Borrower is contesting the amount and validity of any Imposition other than insurance premiums diligently and in good faith as described in Section 15(d) and all of the conditions specified in clauses (1) through (4) of Section 15(d) are satisfied, Lender will refrain from applying Imposition Deposits to payment of the contested Imposition.

I.

Section 15(e) and Section 16 are modified to read as follows:

15(e)

Borrower shall promptly deliver to Lender a copy of all notices of, and invoices for Impositions, and if Borrower pays any Imposition directly (which Borrower has no obligation to do unless Imposition Deposits have been waived or are insufficient and Lender has notified Borrower of that insufficiency), Borrower shall promptly furnish to Lender receipts evidencing such payments.

16.

LIENS; ENCUMBRANCES.  Borrower acknowledges that, to the extent provided in Section 21, the grant, creation or existence of any mortgage, deed of trust, deed to secure debt, security interest or other lien or encumbrance (a “Lien”) on the Mortgaged Property (other than the lien of this Instrument), or on certain ownership interests in Borrower, whether voluntary, involuntary or by operation of law, and whether or not such lien has priority over the lien of this Instrument, is a “Transfer” which constitutes an Event of Default.

J.

For purposes of Section 18(b), "pre-packaged supplies, cleaning materials and petroleum products customarily used in the operation and maintenance of comparable multifamily properties" shall include, without limitation, pool, spa, maintenance and gardening materials.

K.

The second sentence of Section 18(c) is modified to read as follows:

Borrower shall not lease or allow the sublease or use of all or any portion of the Mortgaged Property to any tenant or subtenant for nonresidential use by any user that, in the ordinary course of its business, would be reasonably expected to cause or permit any Prohibited Activity or Condition.

L.

For purposes of Section 18(d), Borrower shall only be obligated to pay out-of-pocket expenses incurred by Lender in connection with the monitoring and review of an O&M Program and Borrower's performance to the extent such expenses are reasonable.

M.

Borrower's representation and warranty in Section 18(e)(4) regarding requirements for notification regarding releases of Hazardous Materials shall relate only to such releases, if any, at or affecting the Mortgaged Property.

N.

Section 18(e)(5) is modified to read as follows:

(5)

no event has occurred with respect to the Mortgaged Property that constitutes, or with the passing of time or the giving of notice would reasonably be expected to constitute, noncompliance with the terms of any Environmental Permit;

O.

Section 18(g) is modified to read as follows:

(g)

Borrower shall pay promptly the costs of any environmental inspections, tests or audits ("Environmental Inspections") required by Lender in connection with or in preparation for any foreclosure or deed in lieu of foreclosure.  Borrower shall also pay promptly the reasonable costs of any Environmental Inspections required by Lender in connection with, or as a condition of Lender's consent to any Transfer under Section 21, or required by Lender following a reasonable determination by Lender that Prohibited Activities or Conditions may exist.  Any such costs incurred by Lender (including the fees and out-of-pocket costs of attorneys and technical consultants whether incurred in connection with any judicial or administrative process or otherwise) which Borrower fails to pay promptly shall become an additional part of the Indebte dness as provided in Section 12. The results of all Environmental Inspections made by Lender in connection with or in preparation for any foreclosure or deed in lieu of foreclosure shall at all times remain the property of Lender and Lender shall have no obligation to disclose such results to or otherwise make such results available to Borrower or any other party.  Lender will make available to Borrower the results of all other Environmental Inspections made by Lender.  Lender hereby reserves the right, and Borrower hereby expressly authorizes Lender, to make available to any party, including any prospective bidder at a foreclosure sale of the Mortgaged Property, the results of any Environmental Inspections made by Lender with respect to the Mortgaged Property.  Borrower consents to Lender notifying any party (either as part of a notice of sale or otherwise) of the results of any of Lender's Environmental Inspections.  Except in the case of an Environmental Inspection performed in connect ion with a foreclosure or deed in lieu of foreclosure, or a disclosure of Environmental Inspection results that Lender is required by law to make, Lender shall notify Borrower of its intention to disclose such information and shall give Borrower ten days to provide supplemental information, explanations or corrections to accompany the disclosure. Borrower acknowledges that Lender cannot control or otherwise assure the truthfulness or accuracy of the results of any of its Environmental Inspections and that the release of such results to prospective bidders at a foreclosure sale of the Mortgaged Property may have a material and adverse effect upon the amount which a party may bid at such sale.  Borrower agrees that Lender shall have no liability whatsoever as a result of delivering the results of any of its Environmental Inspections to any third party, and Borrower hereby releases and forever discharges Lender from any and all claims, damages, or causes of

action, arising, out of, connected with or incidental to the results of, the delivery of any of Lender's Environmental Inspections.

P.

Lender shall not commence Remedial Work under the second sentence of Section 18(h) unless Lender has given Borrower notice of its intention to do so and Borrower has not begun performing the Remedial Work within 10 days after such notice.

Q.

The following sentence is added at the end of Section 18(j):

However, Borrower shall have no obligation to indemnify any of the foregoing parties to the extent that the proceedings, claims, damages, penalties or costs arise out of the gross negligence or willful misconduct of Lender, any prior owner or holder of the Note, the Loan Servicer or any prior Loan Servicer.

R.

For purposes of Section 19(b), Lender will accept a duplicate original of any insurance policy.

S.

For purposes of Section 19(d), an insurance company will be acceptable to Lender if it has a rating in Best's Key Rating Guide of at least "A-" and a financial size category of at least “v,” provided that if Fannie Mae changes its requirements for the financial rating of insurers generally, Lender may change the requirement set forth in this sentence in a manner consistent with any such change.

T.

Clause (2) of Section 19(g) is modified to read as follows:

(2)

Lender determines, in its discretion, that the combination of insurance proceeds and amounts provided by the Borrower will be sufficient to complete the Restoration.

U.

For purposes of Section 19(h), Lender shall automatically succeed to rights of Borrower in and to insurance policies and unearned premiums only to the extent permitted by the applicable policies and insurance companies.

V.

Section 21(a)(2) is modified to read as follows:

(2)

if Borrower is a joint venture general partnership, a Transfer of (A) any general partnership interest (except for a Transfer to a Qualified REIT Subsidiary, as defined in Section 856(i)(2) of the Internal Revenue Code of 1986, 100% owned by Apartment Investment and Management Company, a Maryland corporation or to a Qualified REIT Subsidiary, as defined in Section 856 (l)(1) of the Internal Revenue Code of 1986, 100% owned by AIMCO OP), or (B) other interests in Borrower that would cause the Initial Owners of Borrower to own less than 51% of all partnership interests in Borrower;

W.

New Sections 21(b)(7), 21(b)(8), 21(b)(9), and 21(b)(10) are added, as follows:

(7)

The Transfer of any joint venture partnership interests in Borrower provided no Change of Control occurs as a result of such Transfer.

(8)

The Transfer of shares of common stock, limited partnership interests or other beneficial or ownership interests or other forms of securities in AIMCO REIT or AIMCO OP, and the issuance of all varieties of convertible debt, equity and other similar securities of AIMCO REIT or AIMCO OP, and the subsequent Transfer of such securities; provided, however, that no Change of Control occurs as a result of such Transfer, either upon such Transfer or upon the subsequent conversion to equity of such convertible debt or other securities.

(9)

The issuance by AIMCO REIT or AIMCO OP of additional common stock, limited partnership interests or other beneficial or ownership interests, convertible debt, equity and other similar securities, and the subsequent Transfer of such convertible debt or securities; provided, however, that no Change of Control occurs as the result of such Transfer, either upon such Transfer or upon the subsequent conversion to equity of such convertible debt or other securities.

(10)

So long as AIMCO REIT owns 100% of the stock of AIMCO-LP, Inc., a Transfer of limited partnership interests that results in AIMCO-LP, Inc. owning not less than 50.1% of the limited partnership interests in AIMCO OP.

X.

Section 21(b)(8) shall apply only to a Transfer of an interest in a Controlling Entity that is prohibited by Section 21(a)(7).

Y.

A new Section 21(d) is added, as follows:

(d)

For purposes of this Section 21, the following terms shall be defined as follows:

(1)

"Change of Control" shall mean the earliest to occur of (A) the date an Acquiring Person becomes (by acquisition, consolidation, merger or otherwise), directly or indirectly, the beneficial owner of more than forty percent (40%) of the total Voting Equity Capital of AIMCO REIT then outstanding, or (B) the date on which AIMCO REIT shall cease to hold (whether directly or indirectly through a wholly owned intermediary entity such as AIMCO-LP, Inc. or AIMCO-GP, Inc.) at least 50.1% of the limited partnership interests in AIMCO OP, or (C) the date on which AIMCO REIT shall cease for any reason to hold (whether directly or indirectly) (i) the interests in the Joint Venture Partners held as of the

date of this Instrument (as evidenced by organizational charts and documents submitted to Lender as of such date) and (ii) the Controlling Interest(s) in the Borrower, or (D) the replacement (other than solely by reason of retirement at age sixty-five or older, death or disability) of more than 50% (or such lesser percentage as is required for decisionmaking by the board of directors of trustees, if applicable) of the members of the board of directors (or trustee, if applicable) of AIMCO REIT over a one-year period where such replacement shall not have been approved by a vote of at least a majority of the board of directors (or trustees, if applicable) of AIMCO REIT then still in office who either were members of such board of directors (or trustees, if applicable) at the beginning of such one year period or whose election as members of the board of directors (or trustees, if applicable) was previously so approved.

(2)

"Acquiring Person" shall mean a "person" or group of "persons" within the meaning of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended.  However, notwithstanding the foregoing, “Acquiring Person” shall not be deemed to include any member of the Borrower Control Group unless such member has, directly or indirectly, disposed of, sold or otherwise transferred to, or encumbered or restricted (whether by means of voting trust agreement or otherwise) for the benefit of an Acquiring Person, all or any portion of the Voting Equity Capital of AIMCO REIT directly or indirectly owned or controlled by such member or such member directly or indirectly votes all or any portion of the Voting Equity Capital of AIMCO REIT, directly or indirectly, owned or controlled by such member for the taking of any action which, direc tly or indirectly constitutes or would result in a Change of Control, in which event such member of the Borrower Control Group shall be deemed to constitute an Acquiring Person to the extent of the Voting Equity Capital of AIMCO REIT owned or controlled by such member.

(3)

"Borrower Control Group" shall mean Terry Considine, Peter K. Kompaniez, Richard S. Ellwood, J. Landis Martin, Thomas L. Rhodes and James N. Bailey.

(4)

A "Person" shall mean an individual, an estate, a trust, a corporation, a partnership, a limited liability company or any other organization or entity (whether governmental or private).

(5)

"Security" shall have the same meaning as in Section 2(1) of the Securities Act of 1933, as amended.

(6)

"Controlling Interest(s)" shall mean (i) with respect to a partnership, such majority and/or managing general partner interests which, together with a majority of limited partnership interests if necessary for consent purposes, vest in the holder of such interests the sole power, right and authority to control the day to day operations of the Borrower; including, without limitation, the authority to manage, operate and finance the Mortgaged Property, (ii) with respect to a corporation, the number of shares which entitle the holder to elect a majority of the board of directors of the Borrower, and (iii) with respect to a limited liability company, such majority and/or managing member interests as vest in the holder of such interests the sole power, right and authority to control the day to day operations of the Borrower; including, without limitation, the authority to manage, operate and finance the Mortgaged Property.

(7)

"AIMCO REIT" shall mean Apartment Investment and Management Company, a corporation organized and existing under the laws of the State of Maryland.

(8)

"AIMCO OP" shall mean AIMCO Properties, L.P., a limited partnership organized and existing under the laws of the State of Delaware.

(9)

"Joint Venture Partners" shall mean the entities executing this Instrument on behalf of the Borrower and/or its successors or assigns in interest.

(10)

“Voting Equity Capital” shall mean Securities of any class or classes, the holders of which are ordinarily, in the absence of contingencies, entitled to elect a majority of the board of directors (or Persons performing similar functions).

V.

Section 22(a) is modified to read as follows:

(a)

any failure by Borrower to pay or deposit (i) any Imposition Deposit within three days after it is due, or (ii) any other amount required by the Note, this Instrument, or any other Loan Document when due.

W.

Section 28 shall obligate Borrower to provide such further assurances as Lender reasonably may require.

X.

The words "Except as otherwise disclosed to Lender in writing, before the date of this Instrument" are added at the beginning of the second sentence of Section 41.

V.

Section 37 is modified by adding: “; provided, however, that in the event of a Transfer, any or some or all of the Modifications to Instrument set forth in Exhibit B (if any) may be modified or rendered void by Lender at Lender’s option by notice to Borrower/transferee”.  The modifications set forth in this Exhibit B shall be null and void unless title to the Mortgaged Property is vested in an entity whose Controlling Interest(s) are directly or indirectly held by AIMCO REIT or AIMCO OP.

INITIALS